Exports and tax benefits warmed Cloud Peak’s outlook in a recent call with investors, but its lower-heat coal at Cordero Rojo mine south of Gillette could continue to face decreasing demand in the year ahead.
The firm reported $17.8 million in net earnings for the final three months of 2017, partially due to benefits from the recent U.S. tax overhaul from Congress. The full year was a loss of $6.6 million.
The Gillette-based coal company operates the Antelope and Cordero Rojo mines in Campbell County, as well as the Spring Creek mine in Montana. It is one of the largest publicly-traded firms in Wyoming’s Powder River Basin and one of the few that did not embroil itself in bankruptcy or experience layoffs in recent years as coal demand fell.
Like Arch Coal, which reported its earnings last week, Cloud Peak has seen a benefit from the U.S. tax plan. The company expects a $30 million benefit over the next four years.
Operating costs are anticipated to be on the higher end of Cloud Peak’s normal band, CEO Colin Marshall noted in a call with investors Thursday.
This is due to increased stripping costs at the Antelope and Spring Creek mines and reduced shipments at Cordero Rojo, he said. Spring Creek lies across the Montana border in the northern Powder River Basin.
Cordero Rojo produces 8,400 Btu coal, while the other mines are in the higher 8,800 Btu-range. Cloud Peak, and other companies in Wyoming, have noted in the last year the additional challenge of selling the lower heat coal in the current market.
Reductions in shipments from Cordero will be partially offset by increased seaborne shipments and a slightly higher thermal price going forward, said CFO Heath Hill in the call Thursday.
On a more positive note for the firm, Cloud Peak shipped 4.2 million tons of its coal seaborne compared to 600,000 tons in the previous year.
Marshall also noted the Bureau of Land Management’s approval of new leases at Antelope, which the company originally applied for in 2012.
Those leases have been challenged by a number of environmental groups, including the Sierra Club and the Powder River Basin Resource Council citing issues with air quality, reclamation and the price per ton, which they argue is very low, just 17 cents per ton for a cash payment.
Marshal said he expects they will be able to mine the coal in 2021.
“We believe the legal challenges are without merit,” Marshall said in the call.
Only two reportable injuries occurred at Cloud Peak’s mines in 2017 out of 2.3 million working hours. It is the lowest injury rate the company has to date. It has also been three years now since Cloud Peak has reported an environmental problem.
The company was awarded the 2017 Excellence in Surface Mining Reclamation Award from federal regulators last year.
Follow energy reporter Heather Richards on Twitter @hroxaner