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In This List

Producers take final steps to restructure; others warn of job cuts ahead

Essential Energy Insights - September, 2020

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Producers take final steps to restructure; others warn of job cuts ahead

Twoof the country's largest coal producers took final steps towards emerging frommonths of reorganization this week with court approvals and agreements withcreditors, while another warned the industry downturn could cost thousands ofjobs in the months ahead.

Nearlya year after filing for Chapter 11 bankruptcy court protection, struck a deal thatwill clear the way for it to emerge from reorganization later this month.

Theplan includes deals with federal and state agencies as well as funds controlledby the United Mine Workers of America. The approval also extended to the saleof some of Alpha core assets to Contura Energy Inc. — a new company created bysome of Alpha's first-lien lenders.

Theapproval came shortlyafter the company reported it reached a deal with the U.S. government and withunion health and retirement funds over its bankruptcy reorganization plan.

Notlong after Alpha's announcement, ArchCoal Inc. reported it won court support for its disclosure statement, clearing the wayfor the company to get clearance for its bankruptcy reorganization plan.

Theapproval came after the company reached a global to resolve disputes over itsreorganization plan with senior secured lenders and the committee of unsecuredcreditors. An amended disclosure statement filed July 1 shows seniormanagement agreed to waive $6 million in incentive compensation to push forwardthe global settlement as the company seeks confirmation of its plan.

Meanwhile,Peabody Energy Corp.asked the court for more time to file its own plan.

AsAlpha and Arch moved closer to successfully navigating a bankruptcy processbrought on by the sustained industry downturn, the country's largest privatelyowned coal company warned that ongoing challenges could result in thousands ofjobs lost in the months ahead.

Blamingfederal regulations and persistent competition from low-cost natural gas,Murray Energy Corp.issued potential layoffnotices to 4,400 employees in six states last week."These workforcereductions are due to the ongoing destruction of the United States coalindustry by President Barack Obama, and his supporters and the increasedutilization of natural gas to generate electricity," a statement from thecompany said.

Thepotential layoffs would represent more than 82% of the privately held coalgiant's employees.

Whilethe company later said that it hoped to avoid such cuts, calling the a "precautionarymeasure," one analyst said the warnings could ultimately benefit otherproducers, including CONSOLEnergy Inc. and CNXCoal Resources LP if uncertainty over the situation leads to supplydisruptions.

"Webelieve that a potential supply disruption would mainly benefit Murray's[Northern Appalachia] competitor, CONSOL Energy. Murray produces about 40% ofNAPP supply, with CONSOL coming in second in the region, at about 25%,"said Lucas Pipes, an analystwith FBR & Co.

Onearea where industry uncertainty brought on by the downturn has not hadtremendous effect is on corporate leadership compensation, with pay relatively stableamong CEOs despite the plummeting value of their companies according to anS&P Global Market Intelligence analysis.

Inother coal CEO news, this week three state coal associations filed a "friendof the court" filing in a document expressing concerns in the appeal of the conviction offormer coal CEO Don Blankenship.

Possibleindustry relief emerged this week with news that high summer and rising natural gasprices could set the stage for a rebound in coal in 2017. However, for nowproduction remainsflat this week compared to last year and sharply down for the year-to-date.

Greengroups continued their legal press on the coal industry this week with newsthat conservation groups filed a notice of intent to sue for supposedviolations of the CleanWater Act and the Resource Conservation and Recovery Act at the Maxine minesite near Praco, Ala.

Future events

American Coal Council: The group is holdinga Q&A on July 12 on Campaign 2016 and 21st Century Coal - Policy Parity,Jobs, & Energy Abundance at 2:00 p.m.