Cloud Peak weathers storm

WEATHER and shipment issues caused by flooding has not dampened the financial spirit of Wyoming producer Cloud Peak Energy, which still managed to record decent increases in net income and revenue for the June quarter 2011 compared to the same time last year.
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Courtesy Cloud Peak Energy.

Donna Schmidt

The Powder River Basin region’s only pure-play operator reported net income for the period ended June 30 of $US94.6 million, up year-on-year from $15.9 million.

Revenue for the quarter rose to $387.7 million, up from $341.6 million during the same period last year.

While average revenue per ton of coal went up from $12.20 in 2010 to $12.94 in the June quarter, Cloud Peak’s production dropped from 24.3 million tons to 23.3Mt.

“Operationally, our mines performed well despite heavy rainfall in the PRB, and we were able to load trains as available,” president Colin Marshall said.

“Domestic shipments were slightly lower due to the impact of flooding on the rail system.”

Much of the coal originating from the western coalfields has been subject to disruptions and delays from the rail transportation sector, which has seen delays and damage from heavy rains in some areas of the country and much of the Midwest is still in recovery.

A highlight of Cloud Peak’s quarter was its successful bids on two federal coal leases in an auction conducted by the US Bureau of Land Management.

The West Antelope II North and South coal tracts adds about 407Mt of mineable coal to its portfolio, and the acquisitions also provide access to an additional 80Mt of coal in an adjacent State of Wyoming coal lease that Cloud Peak currently controls.

WAII North was secured on May 11 with a bid of $297.7 million, or about 85c per ton based on the BLM estimate of 350 million mineable tons. It bid $49.3 million for WAII South, or about 87.5c per ton based on the agency’s estimate of 56 million mineable tons.

Finally, Cloud Peak said its shipment shortfalls in the quarter were domestic, while its export shipments to Asia were up significantly, 85% year-on-year from 758,000t to 1.4Mt.

“Demand from our customers continues to be strong," Marshall said.

Looking ahead, the producer held to its initial guidance projections, despite the impact of rail disruptions and unknown pace of recovery that it said would continue to come to light in the third quarter.

“Currently, our expected production from the three company operated mines for 2011 is unchanged at 93 million to 96 million tons,” officials said.

Its 2011 production is essentially fully sold, which parallels its sales plan, and its total realized price per ton is expected to be about $12.91 assuming constant prices for its product.

For next year, Cloud Peak is currently under contract for 81Mt from its three operated complexes and, of that committed production, 69Mt is under fixed price deals with a weighted average price of $13.22/t.

Total Asian exports this year are now expected to be between 4 and 4.5Mt.

Exports from the Spring Creek mine through Vancouver’s Westshore terminal are anticipated to be about 3.5-4Mt on utility company demand, and additional export sales are expected at the Ridley terminal in British Columbia.

“Exports through the Ridley terminal will incur significantly higher rail costs than through Westshore, but do allow additional Asian customers to gain experience burning Spring Creek coal,” Cloud Peak said.

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