trending Market Intelligence /marketintelligence/en/news-insights/trending/gdymsgzggskhi8jlc8wguq2 content esgSubNav
In This List

Powder River Basin sees Q4 drop in coal output to cap otherwise successful 2017

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Powder River Basin sees Q4 drop in coal output to cap otherwise successful 2017

SNL Image

Cloud Peak's Antelope mine is one of the top coal producers in the Powder River Basin, where production fell about 7.9% year over year in the fourth quarter. Persistent utility stockpiles and a warm early winter contributed to the production drop.

Source: S&P Global Market Intelligence

Production levels in the Powder River Basin dropped 7.9% year over year in the fourth quarter of 2017, with some producers blaming a late-year decline on persistent utility stockpiles and a warm start to the winter.

"During the fourth quarter, our Powder River Basin cash costs increased 5%, on 10% lower sales volumes, that were driven by stubbornly high utility stockpiles and a sluggish start to winter," said Arch Coal Inc. President and COO Paul Lang on a fourth-quarter earnings call. He added that fourth-quarter prices for basin coal were unsustainable in the long term and could result in the Arch reining in production levels in the region.

However, Lang said that Arch executives believe their customers will further liquidate stockpiles in 2018, leading to better supply and demand fundamentals over time.

Powder River Basin output saw year-over-year jumps in the first and second quarters of 2017, according to data complied by S&P Global Market Intelligence, but the gains leveled off by the third quarter. Despite the lower results in the second half, full-year production rose 6.6% over the 2016 total.

Fourth-quarter production fell 8.6% from third-quarter results in the region.

The region's highest-producing mine, Peabody Energy Corp.'s North Antelope Rochelle, saw a 186,000-ton production decrease year over year, with output down at Peabody's Caballo and Rawhide mines as well. Nonetheless, analysts with Seaport Global Securities LLC said the producer's basin output exceeded their expectations for the quarter.

SNL Image

Arch's Black Thunder mine dropped from 18.9 million tons in the fourth quarter of 2016 to 17.4 million tons in the recent quarter. While its Coal Creek mine also saw a significant drop, Lang said that mine was effectively sold out for 2018.

According to the coal producer's fourth-quarter earnings report, Arch sold its Powder River Basin coal for that quarter at an average of $12.32 per ton.

Most of the Peabody and Arch mines saw increases in full 2017 output compared to 2016.

SNL Image

Peter Kiewit Sons' Buckskin mine is one of the few in the region that saw a year-over-year increase in production in the fourth quarter.

Source: S&P Global Market Intelligence

Peter Kiewit Sons' Inc.'s Buckskin mine was among the few that saw significant year-over-year increases in the fourth quarter, jumping 27.9%. In the full year, Buckskin increased output 103.6%. However, the long-term prospects for the mine may not be as positive. The producer withdrew an application for expansion in May 2017, citing weakness in the coal market.

Regional newcomer Blackjewel LLC acquired Contura Energy Inc.'s two mines in the area in the fourth quarter for deferred consideration of up to $50 million. Some industry observers said the sale would bring further uncertainty to the basin, especially if Blackjewel intended to ramp up production.

So far that does not seem to be the case at Eagle Butte, which saw a year-over-year decrease in the fourth quarter. The Belle Ayr mine remained relatively flat in production year over year.

Cloud Peak Energy Inc. CEO Colin Marshall also said "the mild start to winter reduced electricity demand and coal burn in Q4" in a Feb. 15 earnings call.

Cloud Peak's Antelope mine dropped from just over 8 million tons in the last quarter of 2016 to 6.6 million in the recent quarter, while its Cordero Rojo mine dropped from 5.6 million tons to 4 million tons in those periods.

Many of the smaller mines in the region saw steady year-over-year production levels in the fourth quarter, such Lighthouse Resources Inc's Decker mine.