The New York Stock Exchange has warned one of Wyoming’s largest coal producers that it could be delisted, following consistent weak performance of the company’s stock.
Gillette-based Cloud Peak Energy’s common stock has been trading below $1 per share at the close of the market for 30 days in a row, prompting a notification last Wednesday that the company had six months to remedy its low stock price or it would be delisted from the NYSE.
Cloud Peak operates the Antelope and Cordero Rojo mines in Wyoming and the Spring Creek mine in Montana. The company employed about 850 miners in Wyoming as of September. It recently announced that it was considering selling itself — among other options — in the face of an untenable coal market. Cloud Peak was trading at 35 cents late Thursday.
Cloud Peak was the only large Wyoming player that did not file for bankruptcy during the coal downturn, when three large coal firms operating in the state sought Chapter 11 protection.
Cloud Peak was subject to the same market contraction as all coal producers in the country in recent years, but while firms like Peabody Energy and Arch Coal invested in metallurgical coal, believing that Chinese demand would be insatiable, Cloud Peak was not able to do so. When the bust hit — and metallurgical coal prices plummeted — the metallurgical coal chasers were left with heavy debt.
This meant that Cloud Peak did not face layoffs and uncertainty in 2015 and 2016 like its competitors. But the company also did not lighten its liabilities through the bankruptcy process. The post-bankruptcy players in Wyoming have fared better than Cloud Peak since the downturn, in part, experts say, because companies like Arch Coal and Peabody are now nimbler in the difficult coal environment due to their slimmer balance sheet.
The Altman Z-score, a rubric used to gauge a company’s risk of bankruptcy, placed Cloud Peak in the distress zone as of Thursday, indicating a possibility of bankruptcy within two years.
Cloud Peak executives have been frank about the challenge of the market during investor calls in recent years. The company has made a number of decisions that are concerning for coal watchers, recently cutting health benefits for retirees, which slashes its costs and allows for more revenue to flow to shareholders despite the challenging market conditions. The company also announced its plan to close its Gillette office and move employees to a mine site in Wyoming.
In an email to employees at the time, CEO Colin Marshall said that he understood changes created uncertainty for workers, but that they were necessary steps for Cloud Peak to grapple with the new normal in the thermal coal sector.
The practice of burning coal for electricity in the U.S. has faltered dramatically over the last decade. Once accounting for half of the power production in the U.S., coal now represents approximately 30 percent of the electricity mix. Cheap natural gas — following technological advances in the oil and gas industry — and increasingly affordable renewable options have shifted new power generation away from coal.
Regulations, like an Obama-era standard to reduce mercury and air toxics from burning coal, led to a number of older and smaller plant closures in recent years, while the changing demand on the electricity grid and a growing customer preference for non-coal power has pressured utilities to choose other forms of generation. That trend has led to premature closures of a number of large coal plants in the U.S.
With each coal plant closure, coal producers have one fewer customer to which they can market their coal. Wyoming’s largest utility, Rocky Mountain Power, is currently considering how to deal with the fact that some of the units at its coal-fired power plants in Wyoming are more expensive than procuring other power sources.
Wyoming is the largest thermal coal producer in the country by far. Its two largest mines, North Antelope Rochelle and Black Thunder, produce nearly a quarter of the U.S thermal coal supply. The industry is also a significant driver of both local and state revenue. About 4,600 full-time miners are employed by the mines in the Powder River Basin, as are numerous workers in jobs that service the coal industry. The plunge in productivity from the Wyoming Powder River Basin coal sector — a cut of about one quarter of annual production from 2015 to 2017— has reduced state revenue significantly.
Cloud Peak did not response to a request for comment by press time.