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Top 10 US coal producers' market value plunges 59.4% January to November

The market capitalization of five of the top 10 U.S. coal companies was sliced by more than half from early January to mid-November.

Those top 10 producers' market value totaled about $4.42 billion as of Nov. 22, a 59.4% drop from $10.88 billion as of Jan. 8, according to data compiled by S&P Global Market Intelligence. The group of companies saw double-digit percentage declines in market capitalization from Jan. 8 to Nov. 22 as domestic demand waned and the seaborne market weakened. Rhino Resource Partners LP, which rounded out the top 10 as of Nov. 22, saw the smallest percentage decline between the periods, with its value falling 18.6% to $11.4 million.

While Cloud Peak Energy Inc. and Westmoreland Coal Co. may have been among the nation's top producers previously, they were excluded because both companies filed for bankruptcy protection during the last year or so and subsequently sold off or transferred their assets.

Peabody Energy Corp., which has been hailed as the leading U.S. coal producer, saw its value plummet 73.5% to $914.8 million on Nov. 22 from nearly $3.45 billion as of Jan. 8. That decline dropped Peabody down to third place in terms of market capitalization, behind Alliance Resource Partners LP and Arch Coal Inc., the only two U.S. producers with a value exceeding $1 billion as of Nov. 22.

Peabody CFO Amy Schwetz said on an Oct. 29 earnings call that the producer's U.S. operations' cash flow exceeded capital expenditures despite challenges in the sector.

"We believe we have a balance sheet that is well-positioned for volatility inherent to the mining industry," she said at the time.

Peabody's share price took a hit on the NYSE following the earnings call, with the price closing at $16.04 on Oct. 28 and then closing at $12.48 after the company reported its earnings. Peabody executives also said on that earnings call that North Goonyella, a metallurgical coal mine in Queensland, Australia, is not expected to produce any meaningful volumes for three or more years after it idled the mine in 2018.

Several analysts said Alliance is one of the strongest, if not the strongest, thermal-focused U.S. coal producer. Given declining domestic utility demand coupled with weakened export markets for U.S. miners, the company's overall strength has proven to be an anomaly in the space. Several of the other top U.S. coal companies reorganized and shed some debt in recent years or benefited primarily from their metallurgical coal investments.

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Alliance executives fielded several questions from analysts on an October earnings call about management's decision to maintain the company's quarterly cash distribution at current levels rather than redirect that money to its balance sheet. President and CEO Joseph Craft said 2020 will be a "correction year" for the sector.

"I think with that correction year, we should be coming out of 2020 a lot stronger, and be in a position to have coverage ratios greater than 1x and closer to what we've experienced in the past," he said. "As we look at 2020 ... it really comes down to what kind of volume can we secure, and based on what we have targeted if we can achieve our objectives, we believe that we can have a distribution at current levels at 1x coverage ratio."

Arch exceeded analyst expectations during the third quarter, with a strong performance from its metallurgical coal operations despite the weakened seaborne market.

"Importantly, we maintained great momentum in our core coking coal franchise with strong volumes and excellent cost control and continued to drive ahead with our well-defined strategy for long-term value creation and growth," Arch CEO John Eaves said in late October.

But other metallurgical coal producers did not fare as well during the recent period. Contura Energy Inc.'s share price nosedived after the company announced its third-quarter financial results on Nov. 14. The company's share price on the NYSE closed Nov. 13 at $18.24 and then closed the next day at $9.38.

Contura CEO David Stetson said he was "extremely disappointed" by the quarterly results after the producer reported a $68.5 million net loss amid rising costs, lower prices and weaker production. Moving forward, the company is placing a greater emphasis on reducing production costs.

"We will always have some level of thermal [coal]," he said. "We produce a very high-quality thermal product, but it's just not a priority for me."

The company with the most significant percentage decline in market value was recently delisted from the NYSE. Foresight Energy LP's market capitalization plunged 97.1% to $14.6 million from January to November following its affiliated company's bankruptcy protection filing in October and a less than impressive third quarter that may foreshadow the company's own trip to a bankruptcy court.