UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

For the quarterly period ended:JuneSeptember 30, 2014

or

Commission file number: 001-3473

“COAL KEEPS YOUR LIGHTS ON”

“COAL KEEPS YOUR LIGHTS ON”

HALLADOR ENERGY COMPANY

(www.halladorenergy.com)

Issuer's telephone number: 303.839.5504

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesþ Noo¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "larger accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso¨ Noþ

As of August 1,November 10, 2014 we had 28,771,00028,778,000 shares outstanding.outstanding.

PART I - Financial Information

ITEM 1.  FINANCIAL STATEMENTS

Consolidated Balance Sheet

(in thousands, except per share data)thousands)

See accompanying notes.

Consolidated Statement of Comprehensive Income (Loss)

(in thousands, except per share data)

⁽¹⁾ There is no material difference between net income (loss) and comprehensive income.income (loss).

See accompanying notes.

Consolidated Condensed Statement of Cash Flows

(in thousands)

See accompanying notes.

Consolidated Statement of Stockholders' Equity

(in thousands)

*Accumulated Other Comprehensive Income

See accompanying notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) General Business

The interim financial data is unaudited; however, in our opinion, it includes all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods. The financial statements included herein have been prepared pursuant to the SEC’s rules and regulations; accordingly, certain information and footnote disclosures normally included in GAAP financial statements have been condensed or omitted.

The results of operations and cash flows for the sixnine months ended JuneSeptember 30, 2014 are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2014. To maintain consistency and comparability, certain 2013 amounts have been reclassified to conform to the 2014 presentation.

Our organization and business, the accounting policies we follow and other information, are contained in the notes to our consolidated financial statements filed as part of our 2013 Form 10-K. This quarterly report should be read in conjunction with such 10-K.

The consolidated financial statements include the accounts of Hallador Energy Company (the Company) and its wholly-owned subsidiary Sunrise Coal, LLC (Sunrise). and Sunrise’s wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. We are engaged in the production of steam coal from mines located in western Indiana.  We own a 45%40% equity interest in Savoy Energy, L.P., a private oil and gas company which has operations in Michigan and a 50% interest in Sunrise Energy, LLC, a private entity engaged in natgas operations in the same vicinity as the Carlisle mine.

(2) Bank Debt

During October 2012, Sunrise Coal, our wholly-owned subsidiary,To finance the Vectren Fuels acquisition (see Note 10) we entered into a new credit agreement (the “Credit Agreement”) with PNC Bank as administrative agent for a group of several other banks. The credit agreement allows for a $250 million revolver and a $175 million term loan. Considering the acquisition and the lenders named therein. The Credit Agreement replaces the previous credit agreement we had with PNC. Closing costs on this new facility were about $1.5 million which were deferred and are being amortized over five years.  Outstandingpayment of bank fees, our debt at JuneSeptember 30, 2014 was $16is $345.6 million.

The Credit Agreement provides for a $165maximum that we can currently borrow is $398 million senior secured revolvingdue to the covenants. The credit facility. The facility matures in five years. The facility is collateralized by substantially all of Sunrise’s assets and we are the guarantor. We will draw on theBank fees and other costs incurred in connection with this new facility as needed for development ofwere about $6.8 million which were deferred and are being amortized over five years. Deferred financing costs, associated with our new projects in Illinoisprevious credit facility, approximated $1 million and Indiana.were expensed.

All borrowings under the Credit Agreementcredit agreement bear interest at LIBOR plus 2%2.25% if the leverage ratio is less than 1.5X (which currently it is),1X; LIBOR plus 2.5% if the leverage ratio is over 1.51X but less than 1.5X; LIBOR plus 2.75% if the ratio is over 1.5X but less than 2X; LIBOR plus 3% if the ratio is over 2X but less than 2.5X and at LIBOR plus 3%3.5% if the leverage ratio is over 2X.2.5X (which it currently is). We are required to pay at the highest rate (LIBOR plus 3.5%) through the first quarter of 2015. The maximum leverage ratio is 2.75X.currently 3.25X.  The leverage ratio is equal to funded debt/EBITDA. The annual commitment fee is 50 BPS but fallsWe entered into swap agreements to 37.5 BPS if we borrow more than 33%fix the LIBOR component of the facility.interest rate to achieve an effective fixed rate of no greater than 5% on 100% ($175 million) of the term loan and on $100 million of the revolver. The maximum that we can currently borrow is $102 million due to our current covenants. revolver steps down 10% each quarter commencing March 31, 2016. As of September 30, 2014 these two interest rate swaps had a de minimus fair value.

The Credit Agreementcredit agreement also imposes certain other customary restrictions and covenants as well as certain milestones we must meet in order to draw down the full amount. Any non-tax cash distributions from Savoy are required to be applied toward the debt. The term loan requires annual amortization during the five years at 10%, 15%, 15%, 20%, and 20% with a balloon at maturity.

See Note 10 regarding ourThe credit agreement matures on August 29, 2019, but we have the right to purchase Vectren Fuels.prepay the loan at any time without penalty.

(3) Investment in Savoy

We currently own a 45%40% interest in Savoy Energy, L.P., a private company engaged in the oil and gas business primarily in the state of Michigan. Savoy uses the successful efforts method of accounting. We account for our interest using the equity method of accounting. Our ownership was 45% but was decreased on October 1, 2014 due to the exercise of options by Savoy’s management.

Below (in thousands) to the 100% is a condensed balance sheet at JuneSeptember 30, 2014, and a condensed statement of operations for the sixnine months ended JuneSeptember 30, 2014 and 2013.

Condensed Balance Sheet

Condensed Statement of Operations

Late last year Savoy engaged Energy Spectrum Advisors Inc. (ESA) to market its Trenton-Black River oil properties located in southeast Michigan. ESA has offices in Dallas and Houston. Information was posted to the ESA websiteNo acceptable offers were received. Marketing efforts are on hold until oil prices recover. Savoy made a $12 million cash distribution in early March 2014. Savoy terminated discussions with a prospective buyer and we are now exploring other alternatives to monetizeOctober 2014; our Savoy investment.share was $4.9 million; such amount was applied toward our bank debt.

(4) Investment in Sunrise Energy

We own a 50% interest in Sunrise Energy, LLC, a private company engaged in the oil and gas business that develops and explores for coal-bed methane gas reserves on or near our underground coal reserves. They use the successful efforts method of accounting. We account for our interest using the equity method of accounting.

Below (in thousands) to the 100% is a condensed balance sheet at JuneSeptember 30, 2014, and a condensed statement of operations for the sixnine months ended JuneSeptember 30, 2014 and 2013.

Condensed Balance Sheet

Condensed Statement of Operations

(5) Other Long-Term Assets and Other Income

*Held by Sunrise Indemnity, Inc., our wholly-owned captive insurance company.

_______________________

*See “MSHA Reimbursements” on page 20.

(6) Self Insurance

In late August 2010 we decided to terminate the property insurance on our underground mining equipment. Such equipment is allocated among five13 mining units spread out over 1423 miles. The historical cost of such equipment is about $111$245 million.

(7) Ohio River Terminal

On May 31, 2013 we purchased for $2.8 million a multi-commodity truck/barge terminal. Over 17 acres of secured area is available. The terminal is at mile point 743.8 on the Indiana bank of the Ohio River near the William Natcher Bridge between Rockport and Grandview, Indiana. Currently the dock will handle third party commodities. In the long term, we plan to ship coal through the dock. The terminal is in close proximity to the NS railroad, the CSX railroad, and American Electric Power's Rockport generating power plant. We do not expect revenue from this asset until 2015.

(8) EarningsNet Income (Loss) per Share

We compute earningsnet income (loss) per share using the two-class method, which is an earnings allocation formula that determines earningsnet income (loss) per share for common stock and participating securities which for us are our outstanding RSUs (restricted stock units).

The following table sets forth the computation of earningsnet income (loss) per share for the threenine and sixthree months ended JuneSeptember 30, 2014.The adjustments for 2013 were not significant (in(in thousands, except per share amounts):

(9)Liability Extinguishment

During the 2013 second quarter we concluded that an approximate $4.3 million liability we recorded during 2006 upon the purchase of Sunrise Coal relating to a terminated coal contract was no longer required. The amount had no effect on cash flows.

(10) Vectren Fuels Pending Acquisition

On July 1,August 29, 2014, Sunrise Coal, LLC entered into an agreement to purchasewe consummated the acquisition of all the common stock of Vectren Fuels, Inc. (a wholly-owned coal mining subsidiary(VFI) for $320 million, which was accounted for as a business acquisition requiring measurement of Vectren Corporation (NYSE:VVC)).acquired assets and assumed liabilities at their estimated fair value in applying purchase accounting. The estimated fair values are based on market participant assumptions. The acquisition was financed through a new debt facility, and the preliminary purchase price allocation and use of proceeds from the new debt facility were as follows (assets not received or liabilities not assumed were retained by the parent company of VFI):

Vectren Fuels, headquartered in Evansville, Indiana, owns three underground coal mines in southwestern Indiana, including

The allocation of the Oaktown 1 and Oaktown 2 mines in Oaktown, Indiana,purchase price is preliminary pending the completion of various analyses and the Prosperity Mine locatedfinalization of estimates. During the measurement period (which is not to exceed one year from the acquisition date), additional assets or liabilities may be recognized if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in Petersburg, Indiana.the recognition of those assets or liabilities as of that date. The preliminary allocation may be adjusted after obtaining additional information regarding, among other things, asset valuations, liabilities assumed and revisions of previous estimates. These adjustments may be significant and will be accounted for retrospectively. The closing expenses include certain contract termination costs related to the termination of a contract post combination, which was to our benefit.

The two underground minesacquisition generated $26.6 million of revenue and $2.5 million of pretax income since the August 29, 2014 acquisition date, and these amounts are included in Oaktown, Indiana are seven miles south of our Carlisle underground mine. operations for the nine months ended September 30, 2014.

The purchase price is $296 million plus additional working capital adjustments, not to exceed a total of $325 million. Sunrise is working with its group of banks headed by PNC Bank to securefollowing unaudited pro forma information has been prepared for illustrative purposes only and assumes the necessary financing. Weacquisition occurred on January 1, 2013. The unaudited pro forma results have been advised by PNC that commitmentsprepared based on estimates and assumptions, which we believe are reasonable, however, they are not necessarily indicative of the consolidated results of operations had the acquisition occurred on January 1, 2013, or of future results of operations. Vectren deal costs of $7.9 million have been excluded from the various banks in the syndication exceed the amount necessary to fund the acquisition. Closing is expected to occur around September 1, 2014.pro forma amounts.

REPORT OF INDEPENDENT REGISTERD PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Hallador Energy Company

Denver, Colorado

We have reviewed the accompanying condensed consolidated balance sheet of Hallador Energy Company and subsidiaries (the “Company”) as of JuneSeptember 30, 2014 and the related condensed consolidated statements of comprehensive income (loss), cash flows, and stockholders’ equity for the three and sixnine month periods ended JuneSeptember 30, 2014 and JuneSeptember 30, 2013. These financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2013, and the related consolidated statements of comprehensive income, cash flows, and stockholders’ equity for the year then ended (not presented herein); and in our report dated February 28, 2014, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2013, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

August 1,November 10, 2014

Denver, Colorado

ITEM 2. MD&A

The following discussion updates the MD&A section of our 2013

Form 10-K and should be read in conjunction therewith.

Our consolidated financial statements should be read in conjunction with this discussion.

Overview

The largest portion of our business is devoted to coal mining in the state of Indiana through Sunrise Coal, LLC (a wholly-owned subsidiary) serving the electric power generation industry.  We also own a 45%40% equity interest in Savoy Energy, L.P., a private oil and gas exploration company with operations in Michigan, and a 50% interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana. We account for our investments in Savoy and Sunrise Energy using the equity method.

Our largest contributor to revenue and earnings ishas been the Carlisle underground coal mine located in western Indiana, about 30 miles south of Terre Haute.  We now expect both Oaktown 1 and Oaktown 2 to significantly contribute to revenue and earnings. For 2014 over 90%86% of our coal sales are to customers with large scrubbed coal-fired power plants in the state of Indiana. Our mines and coal reserves are strategically located in close proximity to our primary customers, which reduces transportation costs and thus provides us with a competitive advantage with respect to those customers; our closest customer’s plant is 13 miles away and the farthest Indiana customer is 100 miles away. We have access to our primary customers directly through either the CSX Corporation (NYSE:CSX) or through the Indiana Rail Road, majority owned by the CSX.

We see an increasing demand for coal produced in the Illinois Basin (ILB) in the future.  Demand for coal produced in the ILB is expected to grow at a rate faster than overall U.S. coal demand due to ILB coal having higher heating content than Powder River Basin (PRB) and lower cost structure than Central Appalachia (CAPP) coal. Many utilities are scrubbing to meet emission requirements beyond just sulfur compliance, even utilities that burn exclusively PRB.  Once scrubbed, those utilities are usually capable of burning ILB coal.  It is this trend of new scrubber installations coupled with rising CAPP cost structure that is leading to increased switching from CAPP coal to ILB coal.  Some fuel switching will also occur from PRB to ILB in newly scrubbed utilities located near ILB coal supply.

The majority of our coal is sold to investment grade customers who have scrubbed, “base load” power plants. Base load power plants are among the lowest cost producers of electricity and the first to be dispatched in the power grid. Due to the large investments made to these plants none of these plants are scheduled for retirement; thus we expect to be supplying these plants for many years.  It is not economical for the smaller, older, less efficient power plants to install scrubbers and other pollution control devices; accordingly, those type plants most likely will be retired in the coming years.

Vectren Fuels pending acquisitionAcquisition

On July 1,August 29, 2014, Sunrise Coal, LLC entered into an agreement to purchasewe consummated the acquisition of Vectren Fuels, Inc. (a wholly-owned coal mining subsidiary of Vectren Corporation (NYSE:VVC)).(VFI) for $320 million. See Note 10 to the financial statements.

Vectren Fuels, headquartered in Evansville, Indiana, ownsowned three underground coal mines in southwestern Indiana, including the Oaktown 1 and Oaktown 2 mines in Oaktown, Indiana, and the Prosperity Mine located in Petersburg, Indiana. We idled the Prosperity Mine on August 29, 2014. The two underground mines in Oaktown, Indiana are seven miles south of our Carlisle underground mine.

The purchase priceOaktown 2 is $296 million plus additional working capital adjustments, notcontiguous to exceed a totalour Carlisle mine and War Eagle reserve. Thus we intend to mine part of $325 million. Sunrise is working with its groupOaktown 2’s reserve from our Carlisle portal and all of banks headed by PNC Bank to secure the necessary financing. We have been advised by PNC that commitmentsour War Eagle reserve from the various banksOaktown 2 portal (as noted later in the syndication exceed the amount necessary to fund the acquisition. Closing is expected to occur around September 1, 2014.

Reserve Table). 

Oaktown 1, Oaktown 2, Carlisle and War Eagle will becomeare now one large underground mining complex representing 161142 million tons of controlled reserves, with three portals, two wash plants and two rail facilities. Duringfacilities, located on the last twelve months, the Oaktown mines sold 5.1 million tons of coal, the Prosperity mine sold 1.8 million tons and Sunrise sold 3.2 million tons from the Carlisle mine. Current 2015 coal sales commitmentsCSX. We anticipate total capacity for the four mines stand at a total of 9 million tons.

The information below pertaining to the three mines we agreed to purchase from Vectren was taken directly from disclosuresbe roughly 9.7 million tons annually. Additionally, the capacity of our Ace in Vectren’s 2013 Form 10-K. Additional disclosure regarding these minesthe Hole mine is contained in Vectren’s Form 10-Q for the quarters ended March 31 and June 30, 2014..5 million tons annually. Thus, our total mining capacity is 10.2 million tons annually.

All coal is high-to-mid sulfur bituminous coal from the Illinois Basin.  Vectren engaged contract mining companies to operate the coal mines.  Contract miners will not be utilized post losing. The three mines generated approximately $293 million in revenue in 2013, compared to $236 million in 2012.

Oaktown Mine Expansion

In April 2006, Vectren announced plans to open two new underground mines.  The first of two underground mines located near Vincennes, Indiana, began full operations in 2010. The second mine began operations during 2013. Reserves at the two mines are estimated at about 94 million tons of recoverable number-five coal at 11,200 BTU and less than 6-pound sulfur dioxide. 

The Oaktown mine infrastructure is located on 1,100 acres near Oaktown in Knox County, Indiana.  Oaktown’s location is within 50 miles of multiple coal-fired power plants.  It is estimated approximately 25,000 acres of coal will be mined during the life of both mines.  Through December 31, 2013, approximately 2,353 acres of coal have been mined with approximately 22,647 acres remaining.  Access to the Oaktown 1 mine was accomplished via a 90 foot deep box cut and a 2,200 foot slope on a 14 percent grade, reaching coal in excess of 375 feet below the surface.  Access to the Oaktown 2 mine is via an 80 foot deep box cut and a 2,600 foot slope on a 14 percent grade, reaching coal in excess of 400 feet below the surface.

Both Oaktown mines are room and pillar underground mines meaning that main airways and transportation entries are developed and maintained while remote-controlled continuous miners extract coal from so-called rooms by removing coal from the seam, leaving pillars to support the roof.  Shuttle cars or similar transportation are used to transport coal to a conveyor belt for transport to the surface.  The two Oaktown mines are separated by a sandstone channel.  The coal seam thickness ranges from 4 feet to over 9 feet.  The mine’s wash plant was originally sized to process 800 tons per hour and has been expanded to 1,600 tons per hour to accommodate the second mine.  The two mines are connected to a railway equipped to handle 110 to 120 car unit trains.  Coal is also transported via truck to customers, which include Vectren’s power supply operations and other third party utilities.  The total plant and development costs to date for the Oaktown mining complex are $291 million, inclusive of advance royalty payments.  The remaining unamortized plant balance as of December 31, 2013 approximates $212 million, inclusive of $41 million of land and buildings, $169 million of mine development and equipment, and $2 million in advance royalty payments.  

Prosperity Mine

Prosperity is an underground mine located on 1,100 surface acres outside of Petersburg in Pike County, Indiana. Prosperity is also a room and pillar mine where coal removal is accomplished with continuous mining machines. The mine entrance slopes gradually for 500 ft on a 9 degree grade and is more than 250 feet below ground level. The coal seam varies in thickness from 4-1/2 to 6 feet.  The mine has a wash plant sized to process 1,000 tons per hour. The mine is connected to a railway and can handle 110 to 120 car unit trains. Coal is also transported via truck to customers, which include Vectren's power supply operations and other third party utilities. The mine opened in 2001, and the total plant and development costs to date are $219 million. The remaining unamortized plant balance as of December 31, 2013 approximates $80 million, inclusive of $6 million of land and buildings and $74 million of mine development and equipment. 

Our Coal Contracts

We have close relationships with oursell coal to the following customers: Duke Energy Corporation (NYSE:DUK), Hoosier Energy, an electric cooperative, and Indianapolis Power & Light Company (IPL), a wholly-owned subsidiary of The AES Corporation (NYSE:AES), Northern Indiana Public Service Co. (NIPSCO), a wholly-owned subsidiary of NiSource Inc. (NYSE:NI) and Vectren Corporation (NYSE:VVC). We also deliver coal to an Orlando utility through an arrangement we have with an affiliate of JP Morgan.three Florida utilities. We believe these Florida sales are an indication of the trend of ILB coal replacing CAPP coal that has traditionally supplied the southeast markets.  

The table below illustrates the status of our current coal contracts:

*Due to rail shipping delays, it is possible that 100,000 tons to 200,000 tons will be pushed into 2015 business.

**During 2013, to accommodate one of our major customers, we entered into three separate agreements that allowed them to defer 338,000 tons originally to be delivered in 2013 to sometime in 2016. Under the agreements they agreed to pay us an average of $5.36/ton over the life of the deferral periods and we recognize the revenue accordingly; otherwise our average price/ton in 2016 would be $43.57.

We expect to continue selling a significant portion of our coal under supply agreements with terms of one year or longer. Typically, customers enter into coal supply agreements to secure reliable sources of coal at predictable prices while we seek stable sources of revenue to support the investments required to open, expand and maintain, or improve productivity at the mines needed to supply these contracts. The terms of coal supply agreements result from competitive bidding and extensive negotiations with customers.

Current Projects

All of our underground coal reserves are high sulfur (4.5 - 6#) with a BTU content in the 11,50011,300 -11,500 range. As discussed below, the Ace surface mine is low sulfur (1.5#) with a BTU content of 11,400. We have no met coal reserves, only steam (thermal) coal reserves. Below is a discussion of our current projects preceded by a table of our coal reserves.

Reserve Table - Controlled Tons (in millions):

December 31, 2013 reserves plus Oaktown 1 and Oaktown 2

Active Reserve (assigned) - *Oaktown 1 and 2 were acquired on August 29, 2014.

** War Eagle reserves will be mined from the Oaktown 2 portal and have been added to the Oaktown 2 reserve base.

Carlisle Mine (underground) - Assigned

Our coal reserves at December 31, 2013 assigned to the Carlisle Mine were 42.142 million tons compared to beginning of year reserves of 43.5 million tons.  Primarily through the execution of new leases, our reserve additions of 2.5 million tons replaced 80% of our 2013 production of 3.1 million tons. We reduced our reserves by 810,000 tons due to revised mining plans. The mine is located near the town of Carlisle, Indiana in Sullivan County and became operational in January 2007. The coal is accessed with a slope to a depth of 340'. The coal is mined in the Indiana Coal V seam which is highly volatile bituminous coal and is the most economically significant coal in Indiana.  The Indiana V seam has been extensively mined by underground and surface methods in the general area. The coal thickness in the project area is 4' to 7'.

The mine has several advantages as listed below: