GILLETTE – Despite losing more than $77 million in the first quarter of 2021 and a prolonged COVID-19 hangover affecting U.S. thermal coal, Peabody Energy Corp.’s Powder River Basin mines were a bright spot for the company.
The company’s three PRB mines saw production down about 11% from the first quarter of 2020, but reduced their costs to realize a profit of about $1.45 per ton on 21 million tons shipped, according to Peabody’s 2021 first quarter earnings results released Thursday.
“Clearly, the company has an extremely strong U.S. thermal business with the lowest costs and best assets in the Powder River Basin,” said Peabody Chief Executive Officer Glenn Kellow in a Thursday morning earnings call.
Considering production was down overall compared to a year ago and revenues down 35 cents per ton, stringent cost-saving measures brought the PRB’s cost per ton down significantly, from $10.28 to $9.56.
While production continues to be affected by retiring coal-fired generation and lower stockpiles at power plants, the PRB mines showed “outstanding performance” in the quarter, Kellow said.
Although Peabody was in the red again in the first quarter this year, it wasn’t as much as the $129.3 million lost in the first quarter of 2020, said Chief Financial Officer Mark Spurbeck. In the past year, the company also has revamped much of its debt obligations, committed more cash as collateral for its reclamation bonding obligations and incurred about $73 million in one-time debt restructuring expenses in the last three months.
Looking forward, Peabody expects the rest of 2021 to be about the same as 2020 for its PRB mines, Spurbeck said. More than 95 percent of this year’s production is already sold and priced at $10.98 per ton.
While Peabody’s Campbell County mines — North Antelope Rochelle, Rawhide and Caballo — continue to generate cash and reduce costs, they are producing at a much lower level than in the recent past.
In the first quarter of this year, the mines produced 21 million tons of coal and employed 1,235 people. In 2020, those numbers were 23.5 million tons and a workforce of 1,489 people. That represents a decline of about 11% in production and 254 fewer employees, or a 17% reduction.
Compared to a few years ago, the numbers are more striking.
In the first quarter of 2018, Peabody mines produced 31.7 million tons of Powder River Basin coal and employed 1,598 people. That makes this year’s Q1 production a 34% decrease from 2018 with 363 fewer jobs, or a drop of 23%.
There also was no news about another major development for Peabody Energy in the first quarter: an announcement that Kellow will be out of the company by the end of August.
Kellow has been CEO since 2013 and has led Peabody through some very turbulent times for the industry, including a high-profile bankruptcy in 2016 and a subsequent prolonged downturn in thermal coal.
Kellow and the company “have entered into a leadership transition agreement as part of its succession planning process,” according to a Securities and Exchange Commission filing, which calls the move a “termination.”
When asked Thursday about the progress of finding a new CEO, Kellow declined to provide any details other than a search is being conducted for candidates inside and outside the company and that the “process is still ongoing.”