Peabody earnings report details continued capital discipline
May 2, 2014
Steamboat Springs — Peabody Energy, which operates Twentymile Mine in Routt County, continues to focus on capital discipline and cost containment, according to the energy and mining company's first quarter earnings report for 2014.
"First quarter capital investments were the lowest in 10 years, and 2014 capital targets have been reduced to $250 to $295 million," the earnings report states. "Current spending is allocated primarily to sustaining capital items, with major new projects dependent on market conditions."
Although Twentymile is the largest mine in Colorado, the 7.2 million tons of coal it produced in 2013 is dwarfed by the 110.9 million tons coal produced by Peabody's North Antelope Rochelle Mine, which is the largest in the U.S., in Wyoming's Powder River Basin.
Discussion of the U.S. coal market during the earnings report and quarterly call focused on Peabody's Powder River Basin holdings. There was no mention of Twentymile or the delayed project to switch production to the Sage Creek portal a few miles northwest of the current portal.
There are a number of capital projects Peabody is working on now, including ramping up production at its North Goonyella Mine in Australia and developing reserves at the Gateway North Mine in Illinois.
The unusually cold winter that hurt multiple other sectors of the U.S. economy proved to be a boon for Peabody's U.S. coal holdings.
Demand for energy generation was up and coal stockpiles were drawn down while prices were up for Southern Powder River Basin coal.
Utility purchasing is expected to increase, according to the earnings report, and demand for Southern Powder River and Illinois basin coal is expected to grow.
The Powder River Basin faced rail congestion issues in the past quarter, delaying coal shipments to plants.
"The rail infrastructure is sufficient," Peabody's Chairman and CEO Greg Boyce said during the earnings call. The rail companies "will have to manage rolling stock."
The volumes anticipated for increased future demand of Powder River Basin coal have been moved in the past along that same rail infrastructure, he said.
North Antelope Rochelle Mine is situated on the southern end of the basin and ties into the Burlington Northern Santa Fe and Union Pacific railroads.
Twentymile ties into Union Pacific's rail lines and delivers coal to Hayden Station and other power plants as far away as Florida.
Boyce said that Peabody's current priority is "sustaining current production with current capital."