Exhibit 99.1 |
1 Some of the following information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, and is intended to come within the safe-harbor protection provided by those sections. Forward-Looking Statements Certain statements in this presentation are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These statements involve certain risks and uncertainties that may be beyond our control and may cause our actual future results to differ materially from expectations. We do not undertake to update our forward-looking statements. Factors that could affect our results include, but are not limited to: U.S. and international financial, economic and political conditions; coal price volatility and demand, particularly in higher margin products; geologic, equipment and operational risks associated with mining; reductions of purchases or deferral of deliveries by major customers; changes in general global economic conditions, including coal, power and steel market conditions; availability and prices of competing energy resources for electricity generation; changes in the interpretation, enforcement of application of existing and potential laws and regulations affecting the production and use of our products; the availability and costs of credit, surety bonds and letters of credit; weather patterns and conditions affecting energy demand or disrupting supply; our ability to identify and implement cost effective solutions for selenium water treatment; the passage of new or expanded regulations that could limit our ability to mine, increase our mining costs, or limit our customers’ ability to utilize coal as fuel for electricity generation; existing or new environmental laws and regulations, including those related to selenium, and changes in the interpretation, enforcement or application thereof; failure to comply with debt covenants; the outcome of pending or future litigation; changes in the costs to provide healthcare to eligible active employees and certain retirees under postretirement benefit obligations; increases to contribution requirements to multi-employer retiree healthcare and pension plans; our ability to attract and retain qualified personnel; negotiation of labor contracts, labor availability and relations; customer performance and credit risks; inflationary trends; downturns in consumer and company spending; supplier and contract miner performance and the availability and cost of key equipment and commodities; availability and costs of transportation; the Company’s ability to replace coal reserves; the outcome of commercial negotiations involving sales contracts or other transactions; our ability to respond to changing customer preferences; and the effects of mergers, acquisitions and divestitures. The Company undertakes no obligation (and expressly disclaims any such obligation) to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. For additional information concerning factors that could cause actual results to materially differ from those projected herein, please refer to the Company’s Form 10-K and Form 10-Q reports. Statement on Forward-Looking Information |
2 Long-Term Growth in Global Coal Markets |
Strong Long-Term Global Seaborne Coal Demand Thermal Metallurgical Long-term sustainable seaborne demand, led by Asia Source: McCloskey 3 |
4 Drivers of Global Coal Demand Global met & thermal coal demand driven by China & India Asian Seaborne Demand |
World Thermal Coal Consumption by Region 5 Global thermal coal consumption expected to steadily grow |
6 Increasing Global Vehicle Production Global production expected to grow over 35% by 2019 |
7 Recovering North American Vehicle Production Production expected to reach pre-recession levels in 2013 |
8 Current Global Coal Markets |
Metallurgical Current Market Conditions Current market weakness leading to reduced U.S. coal production 9 Thermal “Perfect Storm” in the U.S. Low natural gas prices Mild winter Increased regulation Industrial production not yet fully recovered U.S. exports to Europe expected to be sustainable U.S. production being idled Strengthening U.S. demand Weaker international demand European sovereign debt issues Chinese growth rate declining slightly U.S. exports may soften, but expected to remain at historically high levels Australian production increasing after 2011 flooding U.S. production being idled Demand Supply |
Domestic & Global Steel Mill Utilization Both domestic & global steel mill utilization rates are at 70-80% Global utilization has weakened in recent months 10 0 10 20 30 40 50 60 70 80 90 100 U.S. Global Updated: 03/03/12 |
11 Increasing U.S. Total Coal Exports U.S. coal exports of more than 100 million tons in 2011 International buyers looking for geographic diversity of supply |
Export Coal & Steel Prices Met coal pricing remains strong by historical standards Historical re-basing to higher lows and higher highs 12 |
International Thermal Coal Prices 13 |
14 Overview of Patriot |
Patriot’s Strengths 15 Focused on evolving growth markets – Metallurgical coal production – Increasing exports – Modular mine portfolio to adjust to demand Leverage to the market – Met Build-Out program – Legacy thermal contract roll-off Culture – Experienced management team – Comprehensive safety program & environmental stewardship – Disciplined approach, focused on planning and execution Future growth – Organic – Strong and accessible reserve base, particularly high-quality met – M&A – Bolt-on and transformational Product & transportation flexibility |
16 Product Diversification Diverse locations, products & mining methods Significant met & thermal coal exports APP ILB CAPP Met CAPP Thermal NAPP ILB Export Domestic Surface Reserves 1.9 Billion Tons 2011 Shipments 2011 Tons Sold 31.1 Million Tons Mining Method Underground |
17 Advantage of Diversity Multiple quality & transportation options Multiple Basins – 1 NAPP complex – 9 CAPP complexes – 3 ILB complexes Multiple Coal Qualities – 5 Met coal complexes – 8 Thermal coal complexes Transportation Optionality – Rail – Barge – East Coast & Gulf exports |
18 Limited volumes remain unpriced, although some customers requesting deferrals Priced Position in 2012 Priced Business Current Market Metallurgical $144 TBD Appalachia Thermal 65 $55 – $67 Illinois Basin 50 45 – 60 0 5 10 15 Metallurgical Appalachia Thermal Illinois Basin Priced Unpriced |
19 Thermal production likely to decline from above level as year progresses Priced Position in 2013 Priced Business Current Market Metallurgical NA TBD Appalachia Thermal $67 $60 – $75 Illinois Basin 50 40 – 55 Includes the re-pricing of a legacy contract expiring in 2012 |
20 Financial Metrics EBITDA (in Millions) Steady improvement in EBITDA and liquidity Available Liquidity (in Millions) |
21 How Patriot is Responding to Current Markets |
Increasing Exports Expect double-digit exports in 2012 22 |
Met Build-Out Program Multi-year plan to increase our base of higher-margin metallurgical coal products Increase in metallurgical tons sold, as well as met being a higher percentage of our total sales Modular mine portfolio allowing the versatility to dial our met production up or down in a timely manner in response to market conditions 23 |
Recent Actions to Match Production to Demand Metallurgical – Reducing production at Rocklick and Wells complexes – Idling Gateway Eagle mine and one CM unit at Black Oak mine – Idling certain contractor mines – Gateway Eagle and Black Oak on “hot idle” to quickly bring production back on-line Thermal – Idling Big Mountain complex, which produced 1.8 million tons in 2011 – “Sold out” for 2012 deliveries of Appalachian thermal coal 24 Short-term inventory build and lower first half of 2012 shipments |
25 Patriot’s Long-Term Strengths |
Patriot’s Strengths 26 Focused on evolving growth markets – Metallurgical coal production – Increasing exports – Modular mine portfolio to adjust to demand Leverage to the market – Met Build-Out program – Legacy thermal contract roll-off Culture – Experienced management team – Comprehensive safety program & environmental stewardship – Disciplined approach, focused on planning and execution Future growth – Organic – Strong and accessible reserve base, particularly high-quality met – M&A – Bolt-on and transformational Product & transportation flexibility |
28 Reconciliation of EBITDA to Net Income (Loss) ($ in Millions) 2009 2010 2011 EBITDA $110.7 $141.9 $176.7 Depreciation, Depletion & Amortization (205.3) (188.1) (186.3) Sales Contract Accretion, net 298.6 121.5 55.0 Asset Retirement Obligation Expense (35.1) (63.0) (81.6) Restructuring & Impairment Charge (20.2) (15.2) (13.6) Interest Expense & Other (38.1) (57.4) (65.5) Interest Income 16.6 12.8 0.2 Income Tax Provision - (0.5) (0.4) Net Income (Loss) $127.2 $(48.0) $(115.5) |