ARCH - Earnings call transcript Q3 2018

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Operator

Good day. And welcome to this Arch Coal Third Quarter 2018 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Deck Slone, Arch’s Senior Vice President for Strategy and Public Policy. Please go ahead.

Deck Slone

for thanks and morning joining us. Good

considered begin, made during we expected Litigation business may Reform let Private to relating me statements certain future be performance financial that Act. you and statements this Securities our according the remind to Before forward-looking call, statements including

may to posted remind reconciliation find with quarterly described to copy our Forward-looking detail release, in cause that statements are, in you would of call by at the reports These uncertain. the at this in address nature measures Paul degrees, their and that more file we President financial uncertainties, the press we SEC, that also annual future Investors matters Drexler, different which me and of actual non-GAAP are plan end results have statements. materially as as except future different forward-looking to our to information, than be Arch’s President otherwise, you a whether those We CFO. update to maybe in we required COO; morning discuss a expressed our which the Lang, John this morning, a like on can statements, that our CEO; undertake Arch’s the new and of or I forward-looking result by of do law. John not website Eaves, events With archcoal.com. Vice are Senior section of our the our

will and we remarks We formal be to will take begin some with questions. thereafter, happy your John? brief

John Eaves

every strongest EBITDA emergence, excellent by wet and measure. the program. I’m excellent coal at despite tight control In marketplace, and in virtually quarter our ended. incremental hit all ship importantly, operations, margins a as in we quarter the on strong Other was business short, morning, of And resulting our it segments, just Good record an Arch in since cost in everyone. free a unusually the delivered ongoing the Thermal demonstrated use cylinders opportunity saw region. to driving weather Deck. flow by percentage to put pleased thermal return seaborne robust summer the to coking that forward tons PRB of capital report Thanks, significant both captured We during had just the quarter cash successful

cash front, under nearly to shares demonstration time, achievement total in XX% quarters’ clear the buyback repurchased the represents XXX,XXX and inception compelling a That stock, highly a purchases just program’s outstanding potential. bringing shares On million six we of of generating program’s shares. X.XX launch, since at Arch’s just of significant

out and now have timeframe. we over which during million paid addition, dividends a incremental the third returned to form in dividends, current via million the $XXX dividends buybacks we in the an and of shareholders quarter All as significant told, $XX same $X.X to In achievement. now view million returned shareholders we

our confidence sharply going of on as the program of an business, remain excellent on progress in we use the forward. the return value-enhancing that cash, Given and future capital continued free front we and driving focused regard

performance during and operating continued already X our Before compelling X quarter, condition share markets, thoughts the fundamentals our in Paul with few the coking, report primary I’m color to markets. for domestic seaborne on call thermal, highly of good turning coal to will some over additional I happy for the optimism. are the coking, that on also of seaborne reason

but segment, recovery the remain improving we domestic mode with in thermal the During with fourth, outlook.

under pickup growth profile a coking a has to remains at the coking markets. is when X% Globally, time helped that nearly coal with robust That X% demand in economic strong in all a coal speaks nearly coal steel one spur growth start and very expansion at markets. cocking global supply Let’s seaborne demand continued steel year-to-date, demand pressure.

Chinese modestly, Indian steel higher Chinese to While levels continues prices the demand imports retraced. seaborne producers with coal each to and last have decade. the of coking have consistently the promise And time returned coke more in lagging growth coming surge market are year’s significantly

on has equally And higher. globe the years, mines we’ve both push been calls, Layering in coal most been seen supply much on strength investment challenges issues across chain, in recent noted The [ph] coking the to in upshot for continued market we of have in prices the served coal easily recent markets. constrained production a As to and as new weeks. is several fragile have stressed quite in wakeup network supply recent trough. logistics past that recipe at during we fragile very the has and that coking

steel at volumes at producers idle higher by and coals such can additional higher U.S. to at to tends know utilization standing on with recent out coking the quality steel in addition, mills are strength the times strong on at capital coking coal bringing that specializes levels, seeking remains facilitate XX% and the The coming price mill back as line. products. In That reduce as favor well and Arch you domestic mills. steel factors market capacity capacity coking

to As volume will delivery our in minutes. few as this this for percentage release, discussed a morning’s in in resurgent discuss market XXXX, Paul Arch higher is committed in of

lifted $XXX also into The international Coast for delivery, demand historical per European metric But, opportunities and to creates pulls incremental nearly $XXX price thermal West levels markets positive attractive for East basis. volumes markets. that for has That coal and -- West thermal and are international for though prices off API-X markets. Newcastle per the and coal it Turning Gulf, very nearly ton. thermal metric coal Asian is export coal our now prices domestic Robust Coast. both around to thermal ton a on to world compelling generally XXXX the Virginia and it’s off

to U.S. the their noted, heat continues to the utility strengthen. export natural price to and have improved ongoing That are plants access much XXXX. outlook summary, time. translate where to thermal with levels. and into progress improved the This over now In our basins, XX with by to But, lowest us should increase some particularly flow XXXX. gas expect summer We exports cash those generate levels we’re to basis. power higher projecting as are increases we improving at pricing days-supply export marketplace level combined tons we’ve stockpile We with million to at currently pleased thermal brings contributed a levels as the domestic and market. continue That in seen in of into demand on stockpile strong estimate progress the

that With for segments, our returning at us and to a good that, creating ahead call and value shareholders now value highly way. times full you, Paul? more capital to Arch proven high We quarter We times level over all see capturing a performance. to Paul for the in third executing further turn ahead clear in three plan the I’ll to for our resurgent thoughts available marketplace, for business our more following of good are on a on shareholders.

Paul Lang

Thank you, and good John, morning, everyone.

build team strong continued cost our delivered opportunistic value the business. in true mentioned, the the the while made year, another our At the Powder ran for guidance XXXX. quarter coking strong robust execution our had coal again coking John range. modern Thermal stage excellent to In great performance, shipments operations. segment. strong the was strong with at This which midpoint our the We short, We annual Metallurgical Basin at performance expect mines seaborne mining portfolio third board in XXXX. marketing same segment, order we Other by turning continue In across was and the well, time, another segment. excellent in for of saw the our into the what to Metallurgical book performance market progress as in of was from top-line current right performance As in especially large, our our activity we sales meaningful we River be setting

degree of in notable the with the prices cost As U.S. first recent been inflation cost falls but flowing excellent Even costs which cost the roof material months, quartile a of in such continue release, curve. most as mines have job remains believe comfortably the steel this, in we higher an do the mentioned has into cost plates. our of structure to of containment, we and small

volumes During X.X to we XX%. tons again American per ended, we to ton tons market delivered environment. and North this, to in seaborne percentage at the over fixed the the impressive American margin during margins, that customers prices or the the of That’s XXX,XXX X.X tons B of less XXXX, fact consisting coal, Within equivalent million captured million average second customers. despite coking during that $XX were shipped quarter shipped late roughly quarter, favorable just in averaging third North of and High-Vol we the higher quarter,

placed being past, know, quarter of American feel year, those majority XXXX tons dominate North In done business We has of similar roughly on we will market-based also open the [ph] This that to been customers. put price business that a vast certain markets. American North X.X half as with structure, of seaborne total fixed a the during the American you that pricing more to customers the North million with basis.

we thirds on American North basis. As two around volumes a sold tons linked index result, our an a of million X

remaining nearly our than price XXX,XXX for XXXX tons, the ton American average business. $XXX on committed those at volumes we higher roughly As North $XX to fixed per

pricing. of under seaborne In delivery all for XXXX, million tons market on X.X committed based to addition, in we customers is which

mechanisms comfortable in fixed As lock our subject selling instances in now stated, of we’re Arch with strength in comfortable that’s for is previously fixed linked to on those market-based XX% happy basis. fully where signed pricing such which roughly commitments to the and have pricing products, are we pricing. coal index the possible, sales. tons total, and When that not million X.X for secure market-based XXXX, delivery we reflects we’re of value balance equally of can an coking both, our sheet In in has

offset well mine vessel coal fourth coking move the in the the anticipate to improving chain by volumes we as an export of logistics ahead, expected routine is third be at Leer slippage to planned longwall Looking comparable at as be as the year. to the a quarter end

shipment move fall mentioned great QX to wet to XX% capitalizing availability challenge forecasting the $X.XX per unusually in to the strong call, summer level results. an River the Thunder a weather first following In margins our quarter, and Again, Powder during a incremental Mount and XX% over versus increased operations $X.XX deliver on team. Laurel, this, to a the rose an will at $X.XX the impressive now by train We’re on in last by declined Basin, quarter Volumes our overcoming ton. ton. XXXX. the wok increased costs of With QX longwall exceptional our Basin

Basin years. well as as River XXXX remainder Powder additional outer for placed also volumes the of during the We delivery

the to While of lagging other with absence part Basin are is at the market we coal export due price for position. present comfortable Powder our River a meaningful regions in outlook,

XXXX, priced For committed ton. of at total an $XX.XX we’ve and a million average of per tons XX.X

committed average up is like which and reporting XX.X considerably quarter, both a another million index increase we’d tons market have end an of picked in of next per Consequently, For pricing. our $XX.XX that add at and XXXX, anticipate committed of price ton time the committed encouraging at the we’ve has I’d significant since X.X activity at position tons the million positive. our update. XXXX to

five we principally appreciably the lower ahead, fourth acceleration last be over anticipate of the the quarter shipments Looking to in will volumes the due months.

our period, lower but you’d the is development I’d in our Powder other the during into those in cash fourth notable before still predictable Thermal like quarter average the highlight to Other moving range. hitting increase As on will translate cost unit to cost the guidance Basin comfortably segment. River There one expect, during annual volumes

liabilities ARO position. we strengthens of has Arch that properties. This operating much including always long-term further across revised activities coordinated reclamation $XX total continue our ongoing reclamation plan plan on reclamation revised to reclamation a the our Thunder a existing Black Thermal Arch’s our impact change the retirement the approximately legacy This plan liability again basis time plan pre-strip and mine. in our This represent our the asset competitively should minimum the at made on million will idle a process obligation mining fashion. tight and million. and We’re the business Other margins discounted integrates during and a XX% operating low high [ph] segment, will The the of the decrease in aggressive prudent represents change simply point finalizing liability between keeping more costs were housekeeping. seaborne into at of Black as should place a platform $XXX good plan mine’s market. our currently reduce a new with a not our same ordinary of exports In in an story and any mining Thunder accelerate to percentage have

Elk the quarter, operations. During Coal-Mac third million from approximately X.X exported West tons at and our we

capitalized were X slipped particularly by out quarter. These This helped average the delivered in also cash ton Coast, boost cost We control roughly and volumes ton on reduction in on the with second cost in margin Improvement improvements, which XX%. third logistics our solid export segment. turn off shipments drive helped movements segment West vessels the per the chain per in helped of our a increase have XX% our higher combined quarter quarter-over-quarter. for that volumes XX% in

margin segment this delivered QX, For a cash $X XX%. or over

with the of Elk our and X.X there took was and pleased who I’ll time, provide to again close ton which tranche We an is tons segment, believe to At John? Coal-Mac with locking The the Coal-Mac to domestic fourth and a elevated. about in XXXX down a remained safety In and $XX performance stewardship display, XXXX Looking over in high volumes Arch quarter. significant home we third are ahead, business on a interest encouraging. increased, internationally. will strong the other domestic preparation for seaborne to strong the With XXXX. solid and John our as price Across mines well, quarter. exceptional commitment Arch’s call in Drexler, also has the West at we’re set position. delivery placed the Safety continues of both of Arch’s a closing, on Sentinel of seaborne be million for Award same products to And per both that, degree in plant. interest update ran environmental financial end and and for our stage we’ve turn the prices

John Drexler

everyone. morning, good and Paul, Thanks,

quarter, Paul and to cash during cash continued of flow have our return shareholders. that operations the low-cost and discussed, John As continued to met third and levels healthy thermal generate our to we

back we at capital we price almost an During $XX.XX of during quarter have share. repurchased of buying stock, the our an nearly the Since quarter, XXX,XXX of shares outstanding inception per of share. the of back or per million now our $XXX of XX% $XX.XX return average XXXX, second $XX million average program of price stock shares at bought

our million September under As have of XXth, remaining we of $XXX capacity $XXX authorization. million

paid normal our the returned program have paid and shareholders. quarter, capital we bringing the to we dividend our share under Between of addition, dividends capital of $XX as return In the John during dividends, $XXX total our recurring million million. mentioned, total repurchases to and

As resources repurchase current of strong the free forward robust, expect to of share the remainder we proven with given our the year, to we capital to expectation continue flows, ahead and plan. our look drive cash

close Additionally, November payment XXth. of will the has That per the dividend as to business of Directors Board stockholders the dividend of next common share. of approved be quarterly on December XXth of paid record $X.XX on

XXth, balance had of the short-term our and total AR $XXX cash unused position. our investments. ABL, million our liquidity September facilities, liquidity. under Combined securitization $XXX borrowing short-term our to sheet million borrowing have inventory-only At we we and capacity with facility two of and Turning

amended amendment industry. a in quarter we letters liquidity. necessary reminder, the credit, decreased $XXX pro approximately quarter, capacity of our our facilities On also to our borrowing facility letters we to been of credit to-date, of had the As on utilized additional The successfully of facility excess at end would securitization have, forma we requirements. primarily obligations the of to for September of and supporting borrowings letters extended the XXth, of expected these allow various and of the Subsequent in in the issue have the place, third million this term basis, a of amendment credit. to issuance fees XXXX AR

Still, the $XXX point in facility, maintaining always balance on increase be allowing to that focused unused would cash important needs below our securitization will our to the liquidity. in AR the important and million comfortable industry-leading we With component the capacity intensely our and committed level. borrowing Consequently, cyclical we liquidity industry, fall of be sheet. cash requirements will remain out it’s given our an

take volumes his swap layering we to on delivery As of continue in late remarks, an to pricing Paul thermal in positions by for mentioned lock XXXX. and in improving market advantage in international select XXXX

these of statement. Some accounting and on for are swaps are hedge not eligible mark-to-market income thus the

on their ultimately over course mark-to-market through we quarter, our positions As continue reported of But the a swap the expiration. loss to all thermal until result, strengthen to additions of million. pricing the as income any offset $XX million be statement continued These international will with the for X.X At a with pricing majority XXXX. physical on ship total be will that volumes had XXth, for on shipments. swaps we higher this losses September of incurred the program the will swaps by in portfolio associated of

quarter Another the filed associated benefit. modified recognition with primarily we additional the IRS. benefit a the tax results credits during the during The tax position with of quarter was million AMT recognition significant development from third of $XX the the that

the AMOUNT the over next expect credits We cash convert the five to years.

to the tax to continue for effectively foreseeable We expect zero our be rate future.

release, thoughts is the Our Paul additional just A note. reflected few provided on our and guidance items operating press to XXXX outlook. cost in sales and

million of expense. $X stems SG&A of the at increase additional from and is quarter primarily $XX last and This expenses compensation depletion the between now expenses in River programs. shipments million. expected increased the for million our quarter’s expect midpoint depreciation, from now primarily million amortization The million by last $XX employee Our $XX $XXX Powder to be includes This to non-cash increase incentive from We accruals driven equity are between be Basin. million. $XXX midpoint

and our well-capitalized to ready $XX X, strong cash last met flows. turn expect conclude, our to to now program. income our by executing take low-cost, million And interest we from remain back we we we thermal rates. between With capital quarter return the intensely over primarily To call focused benefit you. operate to Tier Operator, is The be interest rising are and our continue reduction well-positioned million. net of plan increased addition, to exceptionally driven $XX from to interest generate expense In franchises I’ll the on remain that, questions.

Operator

Thank first Jeremy comes question with you. from Our Clarksons. [Operator Instructions] Sussman

Jeremy Sussman

guys to a Good today certainly morning you quite set out Hi. congratulations though quarter, of solid with very numbers. picked on and solid such come

John Eaves

there It’s a little out messy Thanks, today. Jeremy.

Jeremy Sussman

today. tough on one just contracts. Look, domestic let It’s start Yes. annual me the met

the guess. I think, of I portion $XXX.XX, fixed

First, what about remarks, quality market-based your you is that how you have domestic million came pricing, dynamic a kind tons of is you prepared change, in I talk that? And which then bit of a secondly, Can just of about? guess. that about noted X

Paul Lang

the and it was Low-Vol. of on heavier with three but products, probably American was North A little High-Vol the weighted sales, of Jeremy, all mix bit little a towards High-Vol B commitment a it

a a linked. And X looking for comfortable very more And about of the of change of as all question we and index our America What unique particularly came facing we this saw it’s have bit little together. are million multinational strategy index comfortable far also contract. U.S. of have kind doing prices As we in we be. linked we it where some tons the customers, to going are hence we where I the was the companies North were at think, business that with think much felt operations steel

John Eaves

as mean, locking Paul had the indicated year. the interest I differently. customers, his domestic and guess, team as I them price we But in John. for out with some said, set our volume used and to is this doing in that Paul Jeremy, we’re And customers field

at And continued looked is we the the market, markets we’re in domestically. they above time, index So, international when higher. to move since seeing that saw the what we

look you instance, transportation, between you mine. morning pull $XX if short the at A XXX, So, that High-Vol $XX transportation, still to can somewhere to at take this get back you and $XXX $XXX out it’s you class and just for use convert and

the we we So, Absolutely. But, pretty today, those retrace we we’ve decision. made. feel we’ve are made bit? think decisions prices given Can a where little prudent about good a

Jeremy Sussman

color follow-up. sounds just that That’s And great. super quick a and helpful maybe

higher that this So, XX% route? you’ve kind you trading the there bought to volume quite last a quarters, said, be of where the float back With worried point curious over more is dividend is you I’d obviously maybe your stock, or push you’d of dynamic. be just weigh about how towards impressive. six which the

John Drexler

show Hey, generate share Jeremy, to Clearly, value. our have Drexler. great this to our repurchase see we is with we cash, ability our execution we that generate see on to John and what ability and the program confidence continues

at our been question see is that the as But, it’s our ability Your where the shares with moving where opportunity we we’ll clear evaluated. cash, with I we see we sit today, see our we think one, generate move constantly market that here we’ve very forward with to plans forward. with conditions, today

that’s forward, under always our what move move plans we something constant as environment. I are think that’s current in Now, consideration. clear quite now, the been forward we’ve right as But we

John Eaves

right I now John. the don’t discussions, look we we most dividend time, And when vehicles. Hey, have in any certainly feedback always liquidities with mean think mean, But At at. two issue the the feedback, Arch Board. it’s is right know we’ll discussions those value-enhancing our and we we’re as do and John that said, always great, been look it’s I vehicles buybacks; the we’re about. But, market. with share that this for something we value create I having at Jeremy, those getting that Coal. now, get

Jeremy Sussman

Thanks helpful. luck. very That’s good and very much

John Eaves

you. Thank

Operator

Thank you.

comes next Global. Our with Mark from Seaport question Levin

Mark Levin

right what decrease, you about that which guys maybe Hey, PRB tons million from Couple sure QX. just XX a of mean, and magnitude -- obviously to is questions. relates just that big that’s about to guide I like looks make terrific specifically of pretty the it. of great. way thinking the PRB, of to drop XX another think in the One Is QX. want QX did volumes how quarter. on QX, quick you it kind how is to in relative that to million the Again, congratulations right, the implies --

Paul Lang

that the think, I’m What believe I obviously clearly shipped additional well in but Mark, may And into sales, XXXX what We got bit think little five went of you to net, now. QX. are range very is, not get we’re it XXXX, we months knowing in last Yes. we But back we correct. we it do very a out I only doing. I I into exactly well this come think translate you’ve concerned net, going about ahead.

John Eaves

At the same time, Mark, we didn’t really bring any XXXX volumes into XXXX neither.

pretty So, about good we feel that.

Mark Levin

That’s perfect. Great.

on Just to clarify XXXX.

percentage book, contracts price into next the it was book XX% you fixed of So, What have would when in in met given coal we on just the fixed into shipments and think look going and just I XXXX, XXXX, year? that maybe flat, this you I do the going price, guidance. about over making overall the year, book what we expect to at assumption. met is assuming be annual But realize think, XXXX number ‘XX? haven’t

Paul Lang

it’s say, than be less going I’d Mark, to XX%.

Mark Levin

cash Okay, And got cost met coal. XXXX in on related to it. then,

So, a referenced you couple raw material be, of things. inflation. some maybe One would

raw inflation. You didn’t but inflation, your reference referenced labor material

-- to that and I or won’t in You’ll Laurel I think no year-over-year continue next assuming had issues? we XXXX, down being about geological about first against, -- met costs guess, in comp met coal cash further the quarter, cash year. coal continue there’s there be the and considering geologic should think to Mount the hopefully XXXX issues over in Should you

Paul Lang

look QX, to It’s of But, QX, you’re you as going a talk sense a to at we’re I ‘XX. think where about little at. get early

It the corresponding impact.... could up a out The as problem they point other high look thing is ‘XX. I’d what think as be much I are, class prices we refer and to have are they to in does at

Mark Levin

And then, last question… Sure.

John Eaves

We February. better hopefully what are you in there phase is couple the we more actually same in when have that would fourth said in quarter previous XXXX, on cost right we of a we now, But XXXX, report out Leer and budgeting the as early that which times over into move planning we’ll even time. thickens imply more in thickens and in out calls update

Mark Levin

point. to That’s just was a about very Last market, go which something, you thing, great. you When last and you available still want and It’s maybe U.S. couple think buying good high sort going augment was do met in there what’s to value bankruptcy the out there marketplace the that versus out coal just coking profile greater it, out the look a coal over was back ask, John, at point see strategy, and position weeks. find what generally, or what’s shares announced I of is the say -- a we in there in potentially?

John Eaves

I certainly, under North Mark, now, Right in think production America is tremendous pressure.

kind If to very that of look some liquidity U.S., is in up. at that of of the XX the million production pressure, XX% under tons you we think XX% and number could well go

We’ve vehicle Obviously, was look set the there an from high bar. we a best we and buybacks. share out at As dividends pretty imagine, that’s you M&A perspective. can everything thought

you We a to out our portfolio, we to would impairs think want last our we’ve even got about thing got structure. acquisition think to organic have XXXX. when any value continue M&A third Valley our us with do for great then that piece that cost We go reserve. that an that think structure can the comparable that we cost hadn’t more gets The quality and million external a there, continue we expect we only we opportunities. structure. to that’s and if think compare it’s of investors. opportunity that just that to growth the is our up prices in we do create tons can We’ve and cost Tygart important. the that, cost XXX High-Vol really a And A, got difficult, And be mean, we to would Valley And Tygart Leer. employ compares anything found we It’s I structure additional longwall.

look it’s to we as pretty frankly, find. around, quite So, hard

Operator

Lucas comes question Our Riley B. Pipes from FBR. with next

Lucas Pipes

sometime Good And the Great Jeremy’s I be is back in up would I my follow permitting Leer echo year. this morning, completed of comments. to on mind late What everyone. actually that and X. had wanted Mark’s quarter. I could

process So, to you you a us on and make what would Thank on that at that just point position where be a in you. decision update could stands development.

Paul Lang

we’re got As now we or John as X tremendous with it mentioned, calling Leer organic a opportunity Leer South.

pretty a the think U.S. that’s us. effectively design finishing by We’re I stage and in part. reserve well owned out through the right the unique we’re up And it’s and permitting

this million you about think John to million. be look but X to at in frankly, CapEx higher. the XX operation, longwall code tons years. as that it’s will the or a $XXX And that’s ZIP XX to And production And about costs, put be said, of reserve start plus going little or operation the So, it it’s as we they’ll bit prior minus. base

just out we have that’s in compare an it anything So, you the marketplace. to there when outstanding opportunity

Lucas Pipes

That’s to what And -- you -- said would working you very of level a and where you said greater helpful. on at at be make think that kind a design you point I through you’re Could that? when confidence you have do think elaborate decision?

John Eaves

the at XX% John. current Board. certainly we supply I Lucas, looking that’s this as markets I always think XX% to our we’re mean, business environment, of we’re I talking And something under coal earlier, pressure. looking at. is mean, is to mentioned

over reserve valuable more time. that So, just as wait, we it becomes

to So, that North we we think in is continue it’s time. America, decision and we’ll appropriate make and appropriate unique certainly something the evaluate, at

Lucas Pipes

much that. to with agree very now shift Maybe I topics.

side. that? this pressures commented some Where industry I’ve the elaborate heard release morning maybe that was most it service. from also, then, of rail on press in And improvement? felt rumblings Could you the some the the cost you in are there terms improving on the transportation in think I

I If your would you that, on Thank you. much. could appreciate very maybe thoughts comment

Paul Lang

Yes.

pretty the for with Just the Colorado, of three frankly, think thermal complaints Coast pretty a good particularly well as At good hand and deal of NS I really But, off volumes had started responded pretty of segment. mostly. quarter the UP and other act overall, did rough. East through CSX. Coast, had And rails together QX, a through to on with end lot got problems know you worked CSX saw shipments the UP. at issues. west, been out with quarter the out they all we no we And West I issues. their their the really through think our job and the about going

but vessel is high [ph] X, down. it’s off I the coming still Pier Q think

terminal think sitting but I we today, the aren’t issue. other the terminal an days So, had. only here at at was three to about Hurricane Florence, Obviously, and lost railroads one days we five just that really issues the

Lucas Pipes

side, comment? any cost the on And

Paul Lang

the cost pricing. been in And they while. past, to a said the to Relative for place as are we agreements our in linked side, have

depending quarter is So, about railroads. complicated the on rail one lag thing generally only the our rates they

So, still as million fee, if costs these go even as are rate netbacks. you mentioned And $XX pretty go the prices John up. think rail compelling and terminal the up, earlier, million to about $XX

Lucas Pipes

it. Got

will the and I Well, really appreciate Okay. all color, in best jump back but for of now luck. queue

Paul Lang

Lucas. you, Thank

Operator

next with question Our comes from MKM Scott Partners. Daniel

Daniel Scott

finally million Maybe to Paul, starting market we’re could whether still go starting change some and buying time in inventories approach as the to the -- to before complacency now utilities mean tons, behavior we you starting finally see is to wash are if comment the or are XXX of any thermal out see I as about that? domestic

Paul Lang

are think inventories the that seeing still I you’re utilities comfortable very drop. with

a PRB, coal I lot don’t unfortunately, and issues the of particularly see really on they out any they see delivery. think there

where’s Now, start look, And of pressure things a as are for of the constantly flip inside in backup. norm will picking is point, lot debate But see inventory. get this right about utilities. the at some side now, don’t new we correcting; inventories have that to I of this

Deck Slone

the Deck. pricing here Paul hasn’t since we a seeing activity. of significant moved thing said, end Hey, even seen level much. of are the as as is, Dan. But the we quarter It’s One have

point that supplement a more. fact where to last way the years. going they later in helpful minimum, seeing, a generators buying they’re the morning encouraging. later, that heading And are buying regard. at is at The slow, gas prices be know. there as which we X.XX this are that natural they positions, are been [ph] in been the it they’ve down to houses into XXXX, about higher X to burn that’s little in over stock MMBtu, sort Obviously they’re of be layer have So, purchasing But, but it’s might per the starting we’re however

Xst, since we’re positive, October position. overall a and again we’ve just even about good certainly seen of that’s interest in So, and and what feeling terms activity

Daniel Scott

I as Leer year? quarter one year, next next it’s not next modeling As there And fourth the you is said think longwall is if Laurel far quarter, moves, this any as for first got year, year? one others in there

Paul Lang

two and both at Laurel and finalized. I Leer would next Elk. West with plan I year terms Yes. Mount exact think one don’t But have and of in

Daniel Scott

would be south [Ph] just yet decision, not peaked Leer then quickly, everyone And depth. from you see But go long how construction before Okay. roughly finally else production? to

Paul Lang

It’s two about years. roughly

Operator

from comes next Your with question Vertical Michael Dudas Research.

Michael Dudas

minimize it. to and a about again probably venture outflows, well as the that maybe get very kind you’ll guys or Have and once follow-up Obviously, international into thought potential Is good like on joint come Leer the premium or help a it’s that? that sheet you maybe secure? player for could coal to capital balance something customer of attractive mix Just something South.

Paul Lang

of those we’ve see And that’s at they with keep heavily Yes. part that in particularly interest model what producers And over of and we’ll interest, kind couple the we’re Michael, had there, conversations. some steel with think talking obviously international obviously, you I the looking follow a it’s months. next but Australia. the

John Eaves

in that some certainly marketing there out where with coal was that competition Michael, anything us. meet to X we of Leer want kind make wouldn’t We can associated would was arrangement like marketplace actually with that some somebody sense. in where offtake the do

that just So work. wouldn’t

Paul Lang

Yes.

our into the think, But, we wanting provide in time our -- with to enter the provide, I John business, as cash value. they particularly, have could said. have traders view, got all we

Michael Dudas

X-X secure coal be but there lot from certainly agree, type to in wanting if tend trends of I that more now, continue going a months could offtake forward.

certainly longwall So, there, the to pace enough you regarding comfortable there cost be budgeting hours how the shift, asset. feel the as with issues? turnover to Do in with XXXX? man of an monetizing for and and productivity cadence can might east have option very offset you labor that per be this see them, inflation we of the some that is trends what you aside, moves helpful having mines, Paul, found the think I

Paul Lang

Yes.

mine is talked the to range on leading our prices, performance, where And I year cost turnover on look a of past, the fortunately question, of full probably If to in-house. indicators is X% I been a it is what basically No majority have with we X% the Obviously, we’ve can around retirements, that’s for in in the one coming steel. sitting. that including keep the to bottom keep But the I think at I labor very side, bit in industry. turnover we’re higher steel we’re particularly of And the the of able we think that’s in think outstanding. cost the come inflation circle. there going on it’s particularly benefits. seeing, next on inflation

all if in domestic last you piece and And is corresponding think I prices is what [ph] that earlier look a royalty. and increase turn coal, is, of to So, thicker to that costs. this mentioned in $X.XX into our going is increase said, assistance Leer the the taxes in things the have heading other is $XX, being about in next be that point John heading should year, of at

So, said costs class up of that will the be, headline I a are but as high is stock. some going

Michael Dudas

tend a thanks taking lot. Gentlemen, are every You to agree. quarter, problems those every month, I

Operator

from Instructions] David Williams next [Operator Our you. comes with Thank question [ph] Jefferies.

Unidentified Analyst

of of time. kind taking back but thing. I were up, one wanted I for answered, just guys Thanks follow questions to Most circle my Hi. guess

So, from export you’re to of here? whether obviously, in rail, the terms in out being or coal are of the strength there areas, markets, most ports, the any that or seeing pressure barges get given able particular

John Eaves

we improvements pleased We with our in us place in and don’t have Paul, we port that our think infrastructure got positions I that railroads DTA to the think as problems moving have move Paul an mentioned earlier, long-term agreement a made. The at think we’ve I Bay, that I think anticipate ownership well. fact the fair? mean Curtis we’ve is product. product. I equity very any been

Paul Lang

we’re very volumes for we’re I up head at. think well as set XXXX, export I we looking think into the

Operator

Riley B. from Thank question you. with We Lucas Pipes do a have FBR. follow-up

Lucas Pipes

swaps [Technical Difficulty] export about business. coal the on ask the thermal

were So, obviously lower. in you locked when those prices

not then, are out makes in have pretty you thermal if lower I industry, the case, on about they ship today? impact is, markets the business? you having And full well-publicized remind same trends getting you. specifically do thermal coal coal get specifically coal in There what maybe of realizations. appreciate So, when today. And if maybe your your coal And the realization tons to I on the thermal wanted it that’s you the your been export you the revisit money the with ask strategy side? an would thoughts. Thank if if the is could us that hedging quality

Paul Lang

others the is This and Paul. follow I’ll answer up. can

is is back this items I point. that think of But have adjust that can freight achieve rates pretty well earn number. which the to on few most we Elk the coal ash. others, sulfur out the that quality. of and Coast, a that should the upto gets which a the West as you East the also hedges that small marks answer Coal-Mac, the And its as or recall, we value that that, premium The on of goes are most short value variability and hedging the because coal, Newcastle, on you at if of right far we lost generally hits slower

no discount coal. is there So, that on

John Eaves

we’ve that placed as to-date, got strategy. Lucas, And that we X.X under have million tons indicated, been

exports over Our are for X.X XXXX tons. million

year. lock pricing the as we moving the it in thought a some take opportunity of on of competitive we some So, off improve risk the basis table prudent forward, and for saw prices next to just to was

Lucas Pipes

Got it.

Okay. bit makes a you. on color get to very No sense. that it. little just appreciate wanted I I more much. Thank it

Operator

JP comes from Morgan. with Instructions] next John Bridges Our question [Operator

John Bridges

out thing, The that? there? performance -- of was Could PRB, summer, and wind on something spoke to I new of just a on also result. the and you -- the to the color understand bit wondering and hot this happening of understand give sort us congratulations that and reclamation policy? is You about efficiencies it was

Paul Lang

PRB. of strongest QX quarters know one the generally is you of as John, Yes.

kind But two. paid you, conservative on and job years neighbors it really of lot in a as and it relatively John, that rain design flood out that and structures you protective there baseline. and enough versus And got in team we have completely what our or you layout, the of of spent I’ll a in and summer our mind set tell I’ll as did mile the was And over off. PRB. time wet know, great got the spend But, that a also obviously could the So, I money a be we’re know one say different the maybe to control.

just don’t to doing or good whether very the were team able out or and see very the whatever basically case there was, was great opportunity we lucky know I a job. So, the

John Bridges

run the So, the wet of from to in something QX rain? strength QX in -- that saw strength a related on was the you

Paul Lang

the John. it, I way would That’s characterize

John Bridges

something geometry industry Okay. this have other people -- this or to That’s helpful. you is new and with reclamation, And what then, this methodology your this could there is done that is specific do?

Paul Lang

us, coordinating with the west forth idle cycle. property activity. and basis. the an miles plans, it’s part Thunder assumptions liabilities to holdings particularly formal group Well, in of review includes this better year, annual put our pre-strip about cost. the well as a job that the worked reclamation pit; very closure mine our of last our our And can new And of this for imagine, And out the We on designed had engineers do go at of it’s business was structured and X through you know, a this as plan through normal and our Black activity process you long.

state, plan the So, changes with permitting, recently. on which and approvals and last spent the we working it year, received team this [Technical the required finally Difficulty]

to between And $XX doing million going company are I our you in at to is we million. context, think total And somewhere as $XXX process ARO. what our opening sits remarks, now of finalizing. in my I put about the there in million is of be we’re as that in So, out, $XXX decrease ARO mentioned pointed we

this significant a So, change. is

case to for hard at is this saw unique is Thunder little where this result. have think the was an bar Now, we they and whether a with completely the engineers us Black and ran gauge. I me it outstanding And it. opportunity to took another But clearly,

out we We talking it permit to now want the sort is it’s public. basically, about have We’re it correctly. there, -- simply approval to out because

John Eaves

well. reduce is the it’s at corresponding But, to already There to over able statements as levels an that this an final a our are few from from for remember as us accounting need liability asset value reclamation But, financial once we on approved there development indicated, that liabilities we to time. perspective, be the level John, and basis. action absolutely with accounting So, a be on increase and And prudent will a things think of perspective, low be quarter. legacy that we up. in wrapped an fourth important again operation discounted reflect recorded is that

John Bridges

to costs somehow a move tonnage of got just that on you QX, a throughput, to hope in It’s able do the to give I cost of getting I up are you on the cost estimate of promotion quarter-on-quarter. to there wondered, lower anything going you a can the bit that? complex calculation? take Is fixed us say try bit on that some out unit help are out you, this. and

Paul Lang

to million a think and mine you XXX think stand in back And $XX.XX, Thunder, we range. you at tons the I that Black about $XX.XX XXX the run John, Yes. used to were costs year. about million

mentioned the dropped. only we one effectively anybody of that’s went the Basin. of and River CapEx lowest the that, actually down XX Not cost million probably is the to stories Powder production our in tons, cut think I

the in uptick very very to our it’s clearly at ramping where volume going look of to because we QX, is we’re significantly. are off we’re But of same I think is on we And to as one and QX, good control. at hard that a things fixed into there is cost ramping guidance I head obviously to at As comfortable. we’re the dropped up get trying at an costs going degree think time, see But down. cost very

John Bridges

Okay.

estimate Excellent. QX. to QX. we results. can cost the guidance forward the look you. on So, congratulations And Thank I to use Well,

Paul Lang

you, Thank John.

Operator

[Operator Levin with question Seaport Instructions] Mark follow-up We a Global. from have

Mark Levin

Thanks.

front about a be domestic And on some how are work, that question, in should your index deal. the just quick help appreciated. to Just index XXX% it? of way think just price of freight? would modeling maybe thinking Just or about any deal you mechanics explain the you a there of sort how factor we Can is that

Paul Lang

indexes. basket a it’s Mark, of

of this what’s it’s a So, these only And it’s are collars but is about the collars, wide. deal different some the it probably indexes. also has bit not little East Asian pretty Coast

great But, I -- side XX each think there’s from from at both gives parties. for $XX the midpoint. latitude it

Mark Levin

then, I it. question export has do Great. second And with the appreciate to steam.

what’s the ‘XX, for versus in you color XXXX? front? some how it expect be Is reasonable you into As capturing ‘XX prices think to about that too the early to in today? you assumption verses these XXXX Do flat are market Maybe Arch call? on guys higher

Paul Lang

second, what Mark, capacity XXXX. via uptick the ownership. we we I be is have into One, see a exports thermal And it that you’ll our may slight appears rail exporting in of from our Mexico. think in DTA

those I technically So, tons, guess are are while, export seaborne. not

uptick I bit expecting thermal. of a in an overall, little So, am

Deck Slone

lot that well. for Mark, of on There’s intense. as competition business Deck. the Elk, West flip coal it’s side, a domestic The for is pretty interest

And to will domestically obviously, the for now a the So, certainly better putting that. we right in process if those went take hard tons, to are domestic look. will tons we and terms of customers compete netbacks that

Mark Levin

then, And Deck, much go they’re remind on overseas Like, maybe overseas, are than export -- West compare they domestic. attractive this us, I year? how assume netbacks going how more will just Elk those the is or today? is do And of

Deck Slone

Yes.

we Elk. this of roughly went West two-thirds year, out So, we were went -- export

trickier we the a remains it very, depends. And of mark or trickier look curve. certainly At be gets off would gets West Coast, be as to moving as Elk a to little on further whether sort out about netbacks the not tons very think hit It this moment, Gulf. It you down seen. But, that so, you West little pricing with strong.

to But simple the Clearly, but no best drive longer answer will we’re is. evacuate where the tons value to what’s have and just value that looking be best find we in out benefits. that, [ph] up international comparing to other Mark, we really trying certainly the term. at So, marketplace going also

Operator

are There additional no time. you. at Thank questions this

John Eaves

thank everybody call the positioned into about We us Company the to how we’ve want today. for feel I XXXX. joining good moving on certainly

to met This the thermal strength team dividends. believe is continue the there in international shareholders cash, as through markets. management is We well buybacks laser-focused share as valuable returning markets, our and on excess to

quarter fourth we week you or So, Thank updating in first call forward sometime of you. to two look the February. on

Arch Resources (ARCH) 23 Oct 182018 Q3 Earnings call transcript