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Warrior reports record coal sales; Peabody pledges to ramp up share buybacks

Three of publicly traded coal producers reported earnings this week, with varying second-quarter results across the board.

Warrior Met Coal Inc. reported record quarterly high sales volumes, resulting in $197 million in free cash flow, a record high for the company. While some in the industry have expressed concern lately about low seaborne coking coal prices, the pure-play metallurgical miner's executives said market conditions remained strong despite the price volatility.

They did acknowledge that global steel producers saw a rapid decline in their margins as a result of falling finished product prices and higher cost of materials.

"Demand for our premium coal was strong during the quarter despite the margin pressures on our customers," CEO Walter Scheller said.

Despite Peabody Energy Corp.'s share price falling by 50% or so over the last year, CFO Amy Schwetz defended the focus of the largest U.S. coal company in buying back shares, on an earnings call this week.

Executives said they plan to ramp up the miner's share buyback program in the second half of the year after spending $57.2 million in the second quarter and an additional $51 million in July on share repurchases.

"In terms of investment, whether that be an investment in our current portfolio of assets, or [mergers and acquisitions], our investment filters remain the centerpiece of our activity," Schwetz said.

NACCO Industries Inc. expects to see a year-over-year drop in coal deliveries in the second half and full-year 2019 due to the timing and duration of power plant outages and in comparison to high 2018 delivery levels. The company reported lower second-quarter operating profit in its coal mining segment.

While many coal producers were preparing their second-quarter earnings reports this week, others were more active in the bankruptcy courts. Cloud Peak Energy Inc. had planned to hold an auction on its assets Aug. 1 but delayed it for another week. It is still unclear what, if any, decision has been reached in Blackjewel LLC's auction, which began Aug. 1 and continued into Aug. 2.

Two interested parties filed objections to Cambrian Coal Corp.'s bankruptcy proceedings. A major creditor alleged in an objection to its planned bidding and sale procedures that the company may be heading toward a "fire sale" and receive less money for its assets than they are worth. Natural Resource Partners LP, which has several real property coal leases with Cambrian, wrote that the company's proposed timeline for bids, an auction and a sale hearing does not give contract counterparties enough time to evaluate the proposed buyers and their offers.

On the regulatory front, the U.S. Office of Surface Mining Reclamation and Enforcement announced that it will no longer pursue drafting regulations to limit emissions from blasting at coal mines. The office granted a petition to begin rulemaking more than four years ago but has since decided that such regulations would be outside its purview.

Democratic lawmakers and environmental groups criticized the administration for its latest work to reduce the boundary around Bears Ears National Monument. Trump signed an executive order previously that would shrink the monument's boundaries by 85% and may allow mining and extraction companies to begin work on the land outside the smaller boundary. While that decision faces unsettled legal challenges, the administration recently moved forward, publishing a final environmental impact statement and proposed monument management plans.

Upcoming events

Coal Market Strategies Conference: The American Coal Council is putting on a conference Aug. 12-14 in Park City, Utah.

National Coal Council: The council will have its annual fall meeting Sept. 11-12 in Washington, D.C.