CANONSBURG, Pa., Feb. 7, 2019 /PRNewswire/ -- Today CONSOL
Coal Resources LP (NYSE: CCR) reported financial and operating
results for the quarter and year ended December 31, 2018.
Fourth Quarter 2018 Results
Highlights of the CCR fourth quarter 2018 results include:
- Cash distribution of $0.5125
per limited partner unit;
- Net income of $16.6
million;
- Adjusted EBITDA1 of $29.4
million;
- Distribution coverage ratio1 of 1.3x;
- Net leverage ratio1 improves to 1.4x compared to
2.0x on December 31, 2017;
- CONSOL Energy Inc. purchased $1.9
million of LP common units on the open market;
- Annual production and sales volume records at the
Pennsylvania Mining Complex (PAMC).
Management Comments
"I am extremely proud to announce our 2018 fourth quarter
results, as it was another strong quarter to cap-off a year of many
achievements," said Jimmy Brock,
Chief Executive Officer of CONSOL Coal Resources GP LLC (the
"general partner"). "The quarter marked a milestone for CCR, as we
completed our first calendar year under our new coal-focused
parent. In 2018, we produced and sold more coal than in any other
year throughout the PAMC's 35-year history. I am also pleased to
announce that we have made significant improvement during 2018 on
the safety front as well. Our total recordable incident rate for
full year 2018 has improved by 13.5% and our total number of
exceptions improved by 12.1% compared to the same period last year.
We continue to remain laser-focused on having zero life-altering
injuries."
"Over the past year, we generated a strong distribution coverage
of 1.3x and reduced leverage on our balance sheet by 0.6x to 1.4x.
While investors across the MLP space are questioning the
sustainability of distributions due to levered balance sheets of
various publicly-traded partnerships, we believe that CCR is
well-positioned given its strong coverage ratio and balance sheet.
Looking forward to 2019, we expect to continue running our mines at
or around record-levels, maintaining sufficient distribution
coverage, and opportunistically considering growth and efficiency
improvement opportunities."
Sales and Marketing
Our Sales and Marketing team sold 1.7 million tons of coal
during the fourth quarter of 2018 at an average revenue per ton of
$49.81, compared to 1.6 million tons
at an average revenue per ton of $46.36 in the year-ago period. This brings our
full-year (FY) 2018 sales to 6.9 million tons, which is at the
high-end of our guidance range. It also represents a record sales
volume year for CCR and its third consecutive year of sales volume
growth. This growth was achieved due to improved demand for our
products, as well as our ability to ramp up production and capture
that demand improvement. The average revenue per ton for the fourth
quarter benefited from stronger pricing on our export sales and
domestic netback contracts compared to the year-ago period.
During the quarter, our domestic customers demonstrated a strong
demand for coal, driven by higher natural gas prices and depleted
coal inventories following stronger than forecasted burn throughout
the year. According to the U.S. Energy Information Administration
(EIA), total coal inventories at domestic power plants stood at
approximately 104 million tons at the end of November 2018, down by approximately 27% from the
same period a year ago, and the lowest end-of-November total
inventory tonnage level since 1997. Furthermore, we believe that
inventories at several of our key customers' Northern Appalachian
rail-served power plants are below normal, and absent any
meaningful weather-related demand decline, we expect to ship all we
can produce during 2019 as our customers will continue to seek
additional coal to replenish their depleted stockpiles. Taking
advantage of this sustained demand, we have contracted greater than
95% in 2019, 53% in 2020 and 28% in 2021, assuming a base annual
production rate of 6.75 million tons. This contracted position
includes a mix of sales to our top domestic customers and to the
thermal and metallurgical export markets, maintaining our
diversified market exposure. With our solid 2019 contracted
position, our primary focus is now on maximizing margins for any
remaining 2019 sales and continuing to build on our contract
portfolio.
Internationally, coal price volatility increased significantly
during the quarter with API 2 prompt-month prices fluctuating
between $86 per ton and $102 per ton. Overall, API 2 prompt-month prices
declined by approximately 13% during the fourth quarter of 2018,
driven by rising global trade tensions and a general decline in
energy-related commodities. However, we have not seen and do not
expect to see any slowdown in near-term export demand for our
product. Furthermore, we are currently shipping our coal under a
previously disclosed priced contract which insulates us from the
ongoing volatility in export pricing as well. There continues to be
a significant arbitrage opportunity between coal, natural gas, and
oil prices on a delivered mmBtu basis in many key global markets.
We believe that with limited coal supply growth throughout the
world, we will continue to have an increasing role in the coal
export markets.
Operations Summary
CCR achieved record production of 6.9 million tons in 2018,
eclipsing the previous record of 6.5 million tons set in 2017 and
marking the third consecutive year of production growth. During
2018, the PAMC ran at approximately 97% capacity utilization,
highlighting the desirability of our product. Additionally, our
Bailey and Harvey mines each set individual production records
during the year. Bailey's 3.2 million tons surpasses its previous
record set in 2014, while Harvey's 1.2 million tons exceeds its
previous record set in 2017. PAMC production for the full year
benefited from strong demand for our products in the domestic and
export markets, improving productivity, initial benefits from
automation projects, and improving geological conditions at the
Enlow Fork mine.
CCR shipped 1.7 million tons of coal during the fourth quarter
of 2018, compared to 1.6 million tons in the year-ago quarter. The
improvement in coal sales volume was driven by strong production
and continued robust demand from our customers. Total coal revenue
increased by $14.9 million to
$86.9 million, primarily driven by a
$3.45 higher average revenue per ton
sold. Our average revenue per ton increased to $49.81 from $46.36
in the year-ago quarter, due to stronger pricing on our export
sales and domestic netback contracts.
Our total costs during the fourth quarter were $72.7 million compared to $67.5 million in the year-ago period. Average
cash cost of coal sold per ton1 for the fourth quarter
was $30.54 compared to $27.30 in the year-ago quarter. The increase was
due to reduced subsidence expense and lower mine maintenance
spending in the prior period. For FY 2018, our total costs were
$290.6 million compared to
$282.3 million in the prior year.
2018 average cash cost of coal sold per ton was $29.29 compared to $29.02 for FY 2017, an increase of less than 1%.
Average cash margin per ton sold1 for the fourth quarter
of 2018 expanded by $0.21, to
$19.27 per ton compared to the
year-ago period, driven by higher average revenue per ton, offset
by higher average cash cost of coal sold per ton.
|
|
Three Months
Ended
|
|
|
December 31,
2018
|
|
December 31,
2017
|
Coal
Production
|
million
tons
|
1.7
|
|
1.6
|
Coal Sales
|
million
tons
|
1.7
|
|
1.6
|
Average Revenue Per
Ton
|
per ton
|
$49.81
|
|
$46.36
|
Average Cash Cost of
Coal Sold1
|
per ton
|
$30.54
|
|
$27.30
|
Average Cash Margin
Per Ton Sold1
|
per ton
|
$19.27
|
|
$19.06
|
Quarterly Distribution
During the fourth quarter of 2018, CCR generated net cash
provided by operating activities of $30.2 million and
distributable cash flow1 of $18.5 million,
yielding a distribution coverage ratio of 1.3x1. Based
on our strong distribution coverage ratio during the quarter,
revenue visibility in 2019, and current outlook for the coal
markets, the board of directors of the general partner has elected
to pay a cash distribution of $0.5125 per unit to all
limited partner unitholders and the holder of the general partner
interest. As previously announced on January 25, 2019,
the distribution to all unitholders of the Partnership will be made
on February 15, 2019, to such holders of record at the
close of business on February 7, 2019.
2019 Guidance and Outlook
Based on our current contracted position, estimated prices and
production plans, we are providing the following financial and
operating performance guidance for 2019.
- Coal sales volumes - 6.70-6.95 million tons
- Coal average revenue per ton - $47.70-$49.70
- Cash cost of coal sold per ton2 - $30.40-$31.40
- Adjusted EBITDA2 - $92-$115
million
- Capital expenditures - $34-$38
million
Fourth Quarter Earnings Conference Call
A conference call and webcast, during which management will
discuss the fourth quarter of 2018 financial and operational
results, is scheduled for February 7, 2019 at 11:00 AM
Eastern Time. Prepared remarks by members of management will be
followed by a question and answer session. Interested parties may
listen via webcast on the Events page of our
website, www.ccrlp.com. An archive of the webcast will be
available for 30 days after the event.
Participant dial in (toll
free) 1-877-870-4263
Participant international dial
in 1-412-317-0790
Availability of Additional Information
Please refer to our website www.ccrlp.com for additional
information regarding this company. Prior to the earnings
conference call, we will make available additional information in a
presentation slide deck to provide investors with further insights
into our financial and operating performance. This material can be
accessed through the "Events and Presentations" page of our
website, www.ccrlp.com. In addition, we may provide other
information about the company from time to time on our website.
We will also file our Form 10-K with the Securities and Exchange
Commission (SEC), reporting our results for the fiscal year ended
December 31, 2018. Investors seeking
our detailed financial statements can refer to the Form 10-K once
it has been filed with the SEC.
Footnotes:
|
|
1 "adjusted EBITDA", "distribution
coverage ratio", "distributable cash flow", "cost of coal sold",
"average cash cost of coal sold per ton", "average cash margin per
ton sold" and "net leverage ratio" are non-GAAP financial measures,
which are reconciled to the most directly comparable GAAP financial
measures under the caption "Reconciliation of Non-GAAP Financial
Measures".
|
2 CCR
is unable to provide a reconciliation of adjusted EBITDA guidance
to net income or cash cost of coal sold per ton guidance to total
costs, the most comparable financial measures calculated in
accordance with GAAP, due to the unknown effect, timing and
potential significance of certain income statement
items.
|
About CONSOL Coal Resources LP
CONSOL Coal Resources (NYSE: CCR) is a master limited
partnership formed in 2015 to manage and further develop all of
CONSOL Energy, Inc.'s (NYSE: CEIX) active coal operations in
Pennsylvania. CCR's assets include a 25% undivided interest
in, and operational control over, the Pennsylvania mining
complex, which consists of three underground mines - Bailey, Enlow
Fork and Harvey - and related infrastructure. For its ownership
interest, CCR has an effective annual production capacity of 7.1
million tons of high Btu North Appalachian thermal coal. More
information is available on our website www.ccrlp.com.
Contacts:
Investor:
Mitesh Thakkar, (724) 416-8335
miteshthakkar@consolenergy.com
Media:
Zach Smith, (724) 416-8291
zacherysmith@consolenergy.com
Reconciliation of Non-GAAP Financial Measures
We evaluate our cost of coal sold and cash cost of coal sold on
a cost per ton basis. Our cost of coal sold per ton
represents our costs of coal sold divided by the tons of coal we
sell. We define cost of coal sold as operating and other production
costs related to produced tons sold, along with changes in coal
inventory, both in volumes and carrying values. The cost of coal
sold per ton includes items such as direct operating costs, royalty
and production taxes, direct administration costs, and
depreciation, depletion and amortization costs on production
assets. Our costs exclude any indirect costs such as selling,
general and administrative costs, freight expenses, interest
expenses, depreciation, depletion and amortization costs on
non-production assets, and other costs not directly attributable to
the production of coal. The GAAP measure most directly
comparable to cost of coal sold is total costs. The cash cost of
coal sold includes cost of coal sold less depreciation, depletion
and amortization cost on production assets. The GAAP measure most
directly comparable to cash cost of coal sold is total costs.
We define average cash margin per ton as average coal revenue
per ton, net of average cash cost of coal sold per ton. The GAAP
measure most directly comparable to average cash margin per ton is
total coal revenue.
We define adjusted EBITDA as (i) net income (loss) before net
interest expense and depreciation, depletion and amortization, as
adjusted for (ii) certain non-cash items, such as long-term
incentive awards including phantom units under the CONSOL Coal
Resources LP 2015 Long-Term Incentive Plan ("unit-based
compensation"). The GAAP measure most directly comparable to
adjusted EBITDA is net income (loss).
We define distributable cash flow as (i) net income (loss)
before net interest expense and depreciation, depletion and
amortization, as adjusted for (ii) certain non-cash items, such as
unit-based compensation, less net cash interest paid and estimated
maintenance capital expenditures, which is defined as those
forecasted average capital expenditures required to maintain, over
the long-term, the operating capacity of our capital assets.
These estimated capital expenditures do not reflect the actual cash
capital expenditures incurred in the period presented.
Distributable cash flow will not reflect changes in working capital
balances. The GAAP measures most directly comparable to
distributable cash flow are net income (loss) and net cash provided
by operating activities. We define distribution coverage ratio as a
ratio of the distributable cash flow to the distributions, which is
the $0.5125 per quarter distribution
for all limited partner units, including common and subordinated
units, issued for the periods presented.
We define net leverage ratio as the ratio of net debt to the
last twelve months' (LTM) earnings before interest expense and
depreciation, depletion and amortization, adjusted for certain
non-cash items, such as long-term incentive awards, amortization of
debt issuance costs and capitalized interest.
The following table presents a reconciliation of cost of coal
sold and cash cost of coal sold to total costs, the most directly
comparable GAAP financial measure, on a historical basis for each
of the periods indicated (in thousands).
|
Three Months
Ended
December 31,
|
|
Years Ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Total
Costs
|
$
|
72,715
|
|
|
$
|
67,458
|
|
|
$
|
290,609
|
|
|
$
|
282,320
|
|
Freight
Expense
|
(1,449)
|
|
|
(5,461)
|
|
|
(10,893)
|
|
|
(18,423)
|
|
Selling, General and
Administrative Expenses
|
(3,671)
|
|
|
(4,479)
|
|
|
(13,931)
|
|
|
(15,697)
|
|
Loss on
Extinguishment of Debt
|
—
|
|
|
(2,468)
|
|
|
—
|
|
|
(2,468)
|
|
Interest Expense,
Net
|
(1,372)
|
|
|
(2,052)
|
|
|
(6,667)
|
|
|
(9,309)
|
|
Other Costs
(Non-Production)
|
(1,724)
|
|
|
(322)
|
|
|
(11,534)
|
|
|
(5,714)
|
|
Depreciation,
Depletion and Amortization (Non-Production)
|
(541)
|
|
|
(543)
|
|
|
(2,166)
|
|
|
(2,187)
|
|
Cost of Coal
Sold
|
$
|
63,958
|
|
|
$
|
52,133
|
|
|
$
|
245,418
|
|
|
$
|
228,522
|
|
Depreciation,
Depletion and Amortization (Production)
|
(10,432)
|
|
|
(9,744)
|
|
|
(42,576)
|
|
|
(39,250)
|
|
Cash Cost of Coal
Sold
|
$
|
53,526
|
|
|
$
|
42,389
|
|
|
$
|
202,842
|
|
|
$
|
189,272
|
|
The following table presents a reconciliation of average cash
margin per ton to total coal revenue, the most directly comparable
GAAP financial measure, on a historical basis for each of the
periods indicated (in thousands, except per ton information).
|
Three Months
Ended
December 31,
|
|
Years Ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Total Coal
Revenue
|
$
|
86,947
|
|
|
$
|
72,063
|
|
|
$
|
341,073
|
|
|
$
|
296,913
|
|
Operating and Other
Costs
|
55,250
|
|
|
42,711
|
|
|
214,376
|
|
|
194,986
|
|
Less: Other Costs
(Non-Production)
|
(1,724)
|
|
|
(322)
|
|
|
(11,534)
|
|
|
(5,714)
|
|
Cash Cost of Coal
Sold
|
53,526
|
|
|
42,389
|
|
|
202,842
|
|
|
189,272
|
|
Add: Depreciation,
Depletion and Amortization
|
10,973
|
|
|
10,287
|
|
|
44,742
|
|
|
41,437
|
|
Less: Depreciation,
Depletion and Amortization (Non-Production)
|
(541)
|
|
|
(543)
|
|
|
(2,166)
|
|
|
(2,187)
|
|
Cost of Coal
Sold
|
$
|
63,958
|
|
|
$
|
52,133
|
|
|
$
|
245,418
|
|
|
$
|
228,522
|
|
Total Tons
Sold
|
1,746
|
|
|
1,555
|
|
|
6,920
|
|
|
6,523
|
|
Average Revenue per
Ton Sold
|
$
|
49.81
|
|
|
$
|
46.36
|
|
|
$
|
49.28
|
|
|
$
|
45.52
|
|
Average Cash Cost per
Ton Sold
|
30.54
|
|
|
27.30
|
|
|
29.29
|
|
|
29.02
|
|
Add: Depreciation,
Depletion and Amortization Costs per Ton Sold
|
6.10
|
|
|
6.24
|
|
|
6.17
|
|
|
6.01
|
|
Average Cost per Ton
Sold
|
36.64
|
|
|
33.54
|
|
|
35.46
|
|
|
35.03
|
|
Average Margin per
Ton Sold
|
13.17
|
|
|
12.82
|
|
|
13.82
|
|
|
10.49
|
|
Add: Depreciation,
Depletion and Amortization Costs per Ton Sold
|
6.10
|
|
|
6.24
|
|
|
6.17
|
|
|
6.01
|
|
Average Cash
Margin per Ton Sold
|
$
|
19.27
|
|
|
$
|
19.06
|
|
|
$
|
19.99
|
|
|
$
|
16.50
|
|
The following table presents a reconciliation of adjusted EBITDA
to net income, the most directly comparable GAAP financial measure,
on a historical basis for each of the periods indicated. The
table also presents a reconciliation of distributable cash flow to
net income and operating cash flows, the most directly comparable
GAAP financial measures, on a historical basis for each of the
periods indicated (in thousands).
|
Three Months
Ended
December 31,
2018
|
|
Three Months
Ended
December 31, 2017
|
Net
Income
|
$
|
16,588
|
|
|
$
|
11,310
|
|
Plus:
|
|
|
|
Interest Expense,
Net
|
1,372
|
|
|
2,052
|
|
Loss on Extinguishment
of Debt
|
—
|
|
|
2,468
|
|
Depreciation,
Depletion and Amortization
|
10,973
|
|
|
10,287
|
|
Unit-Based
Compensation
|
472
|
|
|
2,082
|
|
Adjusted
EBITDA
|
$
|
29,405
|
|
|
$
|
28,199
|
|
Less:
|
|
|
|
Cash
Interest
|
1,952
|
|
|
1,562
|
|
Estimated Maintenance
Capital Expenditures
|
8,980
|
|
|
8,906
|
|
Distributable Cash
Flow
|
$
|
18,473
|
|
|
$
|
17,731
|
|
|
|
|
|
Net Cash Provided
by Operating Activities
|
$
|
30,245
|
|
|
$
|
11,859
|
|
Plus:
|
|
|
|
Interest
Expense
|
1,372
|
|
|
2,052
|
|
Other, Including
Working Capital
|
(2,212)
|
|
|
14,288
|
|
Adjusted
EBITDA
|
$
|
29,405
|
|
|
$
|
28,199
|
|
Less:
|
|
|
|
Cash
Interest
|
1,952
|
|
|
1,562
|
|
Estimated Maintenance
Capital Expenditures
|
8,980
|
|
|
8,906
|
|
Distributable Cash
Flow
|
$
|
18,473
|
|
|
$
|
17,731
|
|
Distributions
|
$
|
14,348
|
|
|
$
|
14,298
|
|
Distribution
Coverage
|
1.3
|
|
|
1.2
|
|
The following table presents a reconciliation of net leverage
ratio to net income (in thousands, except per ton information).
|
Twelve Months
Ended
|
|
December 31,
2018
|
Net Income
|
$
|
66,566
|
Plus:
|
|
Interest Expense,
Net
|
6,667
|
Depreciation,
Depletion and Amortization
|
44,742
|
Unit-Based
Compensation
|
1,842
|
Cash Payments for
Legacy Employee Liabilities, Net of Non-Cash Expense
|
1,519
|
Other Adjustments to
Net Income
|
1,508
|
EBITDA per Affiliated
Company Credit Agreement
|
$
|
122,844
|
|
|
Borrowings Under
Affiliated Company Credit Agreement
|
$
|
163,000
|
Capitalized
Leases
|
8,570
|
Total Debt
|
171,570
|
Less:
|
|
Cash on
Hand
|
1,003
|
Net Debt Per
Affiliated Company Credit Agreement
|
$
|
170,567
|
|
|
Net Leverage Ratio
(Net Debt/EBITDA)
|
1.4
|
Cautionary Statements
We are including the following cautionary
statement in this press release to make applicable and take
advantage of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 for any forward-looking statements
made by us. With the exception of historical matters, the matters
discussed in this press release are forward-looking statements (as
defined in Section 21E of the Exchange Act) that involve risks and
uncertainties that could cause actual results to differ materially
from projected results. Accordingly, investors should not place
undue reliance on forward-looking statements as a prediction of
actual results. The forward-looking statements may include
projections and estimates concerning the timing and success of
specific projects and our future production, revenues, income and
capital spending. When we use the words "believe," "continue,"
"intend," "expect," "may," "should," "anticipate," "could,"
"estimate," "plan," "predict," "project," "will," or their
negatives, or other similar expressions, the statements which
include those words are usually forward-looking statements. When we
describe strategy that involves risks or uncertainties, we are
making forward-looking statements. The forward-looking statements
in this press release speak only as of the date of this press
release; we disclaim any obligation to update these statements
unless required by securities law, and we caution you not to rely
on them unduly. We have based these forward-looking statements on
our current expectations and assumptions about future events. While
our management considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks, contingencies
and uncertainties, most of which are difficult to predict and many
of which are beyond our control. These risks, contingencies and
uncertainties relate to, among other matters, the following:
changes in coal prices or the costs of mining or transporting coal;
uncertainty in estimating economically recoverable coal reserves
and replacement of reserves; our ability to develop our existing
coal reserves, acquire additional reserves and successfully execute
our mining plans; changes in general economic conditions, both
domestically and globally; competitive conditions within the coal
industry; changes in the consumption patterns of coal-fired power
plants and steelmakers and other factors affecting the demand for
coal by coal-fired power plants and steelmakers; the availability
and price of coal to the consumer compared to the price of
alternative and competing fuels; competition from the same and
alternative energy sources; energy efficiency and technology
trends; our ability to successfully implement our business plan;
the price and availability of debt and equity financing; operating
hazards and other risks incidental to coal mining; major equipment
failures and difficulties in obtaining equipment, parts and raw
materials; availability, reliability and costs of transporting
coal; adverse or abnormal geologic conditions, which may be
unforeseen; natural disasters, weather-related delays, casualty
losses and other matters beyond our control; operating in a single
geographic area; interest rates and interest rate hedging
transactions; our reliance on a few major customers; labor
availability, relations and other workforce factors; defaults by
our sponsor under our operating agreement, employee services
agreement and Affiliated Company Credit Agreement; restrictions in
our Affiliated Company Credit Agreement that may adversely affect
our business; changes in our tax status; delays in the receipt of,
failure to receive or revocation of necessary governmental permits;
defects in title or loss of any leasehold interests with respect to
our properties; the effect of existing and future laws and
government regulations, including the enforcement and
interpretation of environmental laws thereof; the effect of new or
expanded greenhouse gas regulations; the effects of litigation;
adverse effect of cybersecurity threats; failure to achieve and
maintain effective internal controls over financial reporting;
recent action and the possibility of future action on trade by U.S.
and foreign governments; conflicts of interest that may cause our
general partner or our sponsor to favor their own interest to our
detriment; the requirement that we distribute all of our available
cash; and other factors discussed in our Annual Report Form 10-K
under "Risk Factors," as updated by any subsequent Forms
10-Q, which are on file at the Securities and Exchange
Commission.
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SOURCE CONSOL Coal Resources LP