Hallador cuts 2016-17 coal sales outlook

OREANDA-NEWS. November 11, 2015. Hallador Energy lowered its sales expectations for the next two years because of weak coal market conditions.

The company, which owns Indiana and Illinois producer Sunrise Coal, cut its sales projections by 500,000 short tons/yr (453,600 metric tonnes/yr) to 6.5mn st in 2016 and 7.5mn st in 2017.

Utility customers likely are done deferring tonnage to next year, Hallador chief executive Brent Bilsland said today. But they are split in their buying habits, with some seeking to take advantage of recent price declines to try to lock in coal sales for the next several years while others are holding back on purchases because of uncertainty over natural gas prices and a buildup in coal inventories.

"We fully anticipate buying from several different utilities in 2016 but we think that will be probably more on a spot basis," Bilsland said.

Hallador has 5.57mn-6.42mn st under contract for next year at an average estimated price of \\$43.34/st and 3.07mn-4.62mn st for 2017 at \\$42.67/st. It expects purchasing activity to pick up after the first few months of next year.

Bilsland declined to be specific about the outlook for prices but said that "supply is coming off line," and the market will eventually come into balance with demand.

The company has the capacity to produce more than 9mn st but it has been running its Carlisle mine at a reduced rate since July to tighten supply in the face of weaker market conditions. Hallador has 1.53mn st under contract for the final quarter of this year, which would bring total 2015 sales to 7.55mn st.

Hallador shipped 6.02mn st in the first three quarters of this year, nearly double the 3.12mn st sold in the same period of 2014. Third quarter sales rose to 1.79mn st at an average \\$45.41/st from 1.5mn st \\$43.18/st in the same period a year ago.

This year's sales increase is tied to Hallador's purchase of Vectren Fuels from Vectren Energy at the end of August 2014. The purchase added the Oaktown 1 and 2 mines to Hallador's portfolio as well as the Prosperity mine, which the company closed last year.

Hallador has contracts for 2018-20 that call for 3.88mn-6.45mn st/yr of deliveries at \\$41.67-\\$43.77/st. Some commitments go through 2024 but none have prices for those years.