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Cloud Peak Energy Q2 loss jumps to $610 million on impairment charge

Houston — Cloud Peak Energy posted a net loss of $609.68 million in its second quarter of 2019 after taking a $620.9 million impairment charge related to its bankruptcy, according to a regulatory filing released Friday.

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The coal producer had previously announced it would release its Q2 earnings late this year after Chapter 11 bankruptcy proceedings began in May.

It posted a loss of $29.87 million in the year-ago quarter.

In the first six months of 2019, Cloud Peak posted a net loss of $659.43 million, compared with a $37.61 million loss in the year-ago period.

The company's revenue in Q2 totaled $168.45 million, down 18.1% from the year-ago period. In the six months through June 30, revenue totaled $313.53 million, down 25.7% year on year.

According to the filing, $135 million of the company's revenue in Q2 came from US shipments, up 5% year on year, about $33 million came from South Korea, down 53.3% compared with the year-ago period, and about $224,000 was from other markets, down 96.4% year on year.

Over the six-month period, the company's US revenue totaled $243 million, down about 9% compared with the year-ago period, while its South Korean revenue was $64.7 million, down 52.6%, and other totaled $5.7 million, down 69.2%.

Cloud Peak shipped 12 million st in Q2, up 3.4% year on year.

In the domestic market, the producer shipped 11.3 million st, up 27% from the preceding quarter due to improved railroad performance following flooding issues in the first quarter of the year.

"Energy Ventures Analysis estimates there were 49 million st of [Powder River Basin] coal inventories on utility stockpiles at the end of July 2019, a decline of 7.1 million st from July 2018 levels," the filing said. "Customers focused on rebuilding inventory in the second quarter by dispatching cheap natural gas over coal."

Cloud Peak exported about 700,000 st in Q2, down 46% year on year. The drop came from "uneconomic pricing and lower demand for coal in South Korea," the filing said, adding that sales have picked up in the second half of the year due to summer heating seasons.

The producer said it is fully sold out for the ongoing third quarter and continue to sell for the fourth quarter.

The company's realized price per ton was $11.63/st in Q2, down from $12.18/st in the year-ago quarter, while the average cost per ton was $10.58/st, down from $11.90/st year on year.

Over the first six months of 2019, the producer sold 21.7 million st, down 8.8% from the year-ago period, and the price per ton was $11.64/st, down from $12.19/st.

The average cost per ton over Q1 and Q2 was $11.62/st, up from $11.41/st in the year-ago period.

Currently, Cloud Peak is committed to sell about 48 million st this year.

BANKRUPTCY PROCEEDINGS

Cloud Peak filed for Chapter 11 bankruptcy protection on May 10, and put its assets up for auction. The Navajo Transitional Energy Co. was the winning bidder for the Antelope, Spring Creek and Cordero Rojo mines, leaving NTEC the third largest coal producer in the US and allowing the company to diversify its assets.

The transaction is expected to close in October.

The agreement was made in exchange for $15.7 million at closing, a $40 million first lien promissory note and a 15 cents/st royalty on all tons produced and sold at the Antelope and Spring Creek mines and on all tons produced and sold in excess of 10 million st per year at Cordero Rojo, and reclamation obligations.

Cloud Peak said in the filing that its two development projects in the northern PRB, Youngs Creek and Big Metal, "[remain] subject to significant risk and uncertainty."

-- Olivia Kalb, olivia.kalb@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com