Patriot Coal Lowers Production - Analyst Blog
23 April 2012 - 5:15PM
Zacks
Bowing to the pressures of the sluggish market demand for
coal, Patriot Coal Corporation (PCX) decided
to lower the production of thermal coal. As a result, the company’s
Freedom underground mine will remain idle. The mine, located in the
Bluegrass complex in Illinois Basin, had produced 1.2 million tons
of thermal coal in 2011.
Subsequent to the production cut, there will be no uncommitted
Illinois Basin thermal coal delivery for Patriot Coal in 2012.
Idling of Freedom underground mine follows the idling of three
other Central Appalachian thermal coal mines, which collectively
produced 1.2 million tons of thermal coal in 2011, in the first
quarter of 2012. Idling of these four mines along with the shut
down of Big Mountain mining complex in February 2012, will lower
the company’s 2012 total thermal coal production by 4 million
tons.
Declining prices of natural gas along with lower demand for
electricity is causing softness in the demand for coal with a mild
winter adding to its woes. Therefore, in an effort to maintain a
balance between demand and supply, the company resorted to shutting
down or keeping the mines idle.
Beginning 2012, Patriot Coal announced the idling of one
contractor-operated mine and two subsidiary-operated production
units in the Rocklick complex, besides idling two
contractor-operated mines in the Wells complex. These mines
are in the Appalachian basin producing metallurgical coal.
The company had guided lower sales volume in 2012 compared with
2011. In 2011, the company’s sales volume was 31.1 million tons
while guided 2012 sales volume is in the range of 27 – 29 million
tons.
Patriot Coal is scheduled to announce its first quarter results
on April 26. The Zacks Consensus Estimate for the first quarter is
currently pegged at a loss of 38 cents, wider than the loss
incurred in the year ago quarter.
We have a Neutral recommendation on Patriot Coal. The
quantitative Zacks #3 Rank (short-term Hold rating) for the company
indicates no clear directional pressure on the stock over the near
term.
Based in St. Louis, Missouri, Patriot Coal Corporation, is a
leading coal producer in the eastern United States, having 13
mining complexes in Appalachia and the Illinois Basin. The company
competes with peers like Alpha Natural Resources
Inc. (ANR), Arch Coal Inc. (ACI) and
James River Coal Co. (JRCC).
ARCH COAL INC (ACI): Free Stock Analysis Report
ALPHA NATRL RES (ANR): Free Stock Analysis Report
JAMES RIVER CL (JRCC): Free Stock Analysis Report
PATRIOT COAL CP (PCX): Free Stock Analysis Report
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