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PRB production dips slightly despite pickup in global coal demand

Production in the Powder River Basin dipped slightly in the last quarter of 2016 despite utilities chipping away at stockpiles and after a surge in the prior period.

Some analysts have recently said that keeping production levels down in the short term could benefit coal companies by driving prices a little higher.

The PRB produced 88.8 million tons of coal in the fourth quarter of 2016, down from 91.7 million tons in the third quarter of 2016 and 96.4 million tons in the fourth quarter of 2015. Production dropped much more in 12-month comparisons, falling 21.8% from 398.6 million tons in 2015 to 311.9 million tons in 2016.

The largest mine in the area, Peabody Energy Corp.'s North Antelope Rochelle mine, declined 15.1% year over year and from 28.2 million tons produced in the fourth quarter of 2015 to 26.2 million tons in the recent quarter as the company moves closer to emerging from Chapter 11 bankruptcy. Peabody's Caballo mine only dropped about 1.6% in the recent 12-month period compared to the previous and actually jumped from a 2.8 million ton output in the fourth quarter of 2015 to nearly 3.3 million tons in the recent quarter. Peabody had reported a surge in production in the third quarter before this quarter's leveling. The coal producer predicted stockholder profit four of five years out of bankruptcy in a recent financial projection.

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Arch Coal Inc., which emerged from bankruptcy in October, saw a small drop in production at its Black Thunder mine in the recent quarter compared to the third quarter of 2016, and a 31.8% drop year over year. Its Coal Creek mine increased production from prior periods, however, jumping from 2.2 million tons in the last quarter of 2015 to 2.7 million tons in the recent period. Coal Creek rose 4.3% year over year, from 7.8 million tons in 2015 to 8.2 million tons in 2016. Analysts have been optimistic about Arch's prospects since it emerged.

Cloud Peak Energy Inc. saw a mixed bag of results, with its biggest mine, Antelope, dropping to 8 million tons in the recent quarter compared to 9.4 million tons in the same period last year. The Cordero Rojo mine climbed slightly quarter over quarter and compared to the third quarter of 2016. While its Spring Creek mine dropped from 3.8 million tons in the fourth quarter of 2015 to 3.2 million tons in the recent quarter, it recovered a little from the 2.9 million tons produced in the third quarter of 2016.

Lighthouse Resources Inc's Decker mine was one of the smallest PRB mines that reported in the fourth quarter of 2016, but was also one of the two that reported an increase from the prior year. The mine produced 3.2 million tons in 2016, compared to nearly 3 million tons in 2015. Lighthouse announced in October that it had begun shipping coal through the Westshore Terminals LP in Vancouver after abandoning efforts to develop the planned Morrow Pacific terminal in Oregon.

Contura Energy Inc., which emerged as a new company with many of Alpha Natural Resources Inc.'s prize assets when the latter emerged from Chapter 11 bankruptcy in the summer, saw a quarter-over-quarter increase at its Belle Ayr mine. Production there rose from 3.8 million tons in the fourth quarter of 2015 to 4.1 million tons in the recent quarter. That number was a drop from the 4.5 million tons it produced in the third quarter of 2016, however. Analysts have also been positive about Contura's outlook.

One of the biggest dives in terms of production occurred at Peter Kiewit Sons' Inc.'s Buckskin mine, which produced 927,145 tons in the recent quarter, less than a third of the 3.2 million tons produced in the fourth quarter of 2015. The mine's output also dropped 60.6% from 13.7 million tons in 2015 to 5.4 million tons in 2016. Some of this production loss paralleled with layoffs over the past year.

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