Q2 2020 Hallador Energy Co Earnings Call

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Good day and welcome to Hallador Energys second quarter 2020 earnings Conference call.

All participants will be in they listen only mode should you need assistance. Please take all conference specialist I personally Starkey followed by zero.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.

Withdraw your question. Please press Star then cheers.

Please note this event is being recorded.

I would now like to turn the conference over to Rebecca Palumbo Director of Investor Relations. Please go ahead.

Thank you Chad. Thank you everybody for taking the time out of your day to day to join us to discuss our second quarter 2020 financial and.

As a reminder, this event is being webcast slides and you will be able to access a replay of this call on our website.

We filed our second quarter form 10-Q yesterday afternoon, and it is also posted on our website.

Participating on today's call is Brent Bilsland, our president and CEO and Larry Martin our CFO.

Very well begin today with the financial overview of the quarter, followed by Brent with comments on operations and market perspective I.

After they complete their remarks, we will open the line up for Q any.

Before we begin a reminder, at some of her remarks. Today may include forward looking statements that are subject to a variety of risks and uncertainties that could cause actual results to differ materially for example, our estimate the mining cost future wholesale regulation and other environmental initiative.

We do not undertake to update our forward looking statements whether as a result at new information future events or otherwise, except as may be required by law and with that I'll turn the call artillery.

Thanks, Betty and good afternoon, everyone.

Before I started my 'cause it.

Buying a definition so we have our free cash flow if I had net income plus deferred income taxes.

DDNA reclamation obligation accretion.

Changes in fair value of hedges.

Our stock compensation expense, [laughter], and add a war and plus or minus the effect of our equity method investment.

Defines adjusted EBITDA, and EBITDA plus stock compensation.

But reclamation obligation accretion or change in fair I imagine has left the effects of our equity method investments and our glass sales.

For the quarter, we had net income of 2200 50000.

Or a penny a share year to date, we had a net loss of 3.4 million or 11 cents a share our free cash flow for the quarter was 6.3 million.

And 3.1 million year today.

Our adjusted EBITDA 13.

[laughter].

13.1 million year to date free cash flow.

Our adjusted EBITDA for the quarter It was 13.2 million.

And for a year to date 27.1 billion.

We didn't we paid down debt at 6.9 million for the core and 19 million for the six months ahead.

Our bad debt.

At June Thirtyth was 161 million.

Our net debt, including our cash on our balance sheet 153.7 million.

And our leverage ratio debt to adjusted EBITDA was 2.97 times.

I'll now turn call over to our CEO Brendan.

Right.

Despite the stream at the store challenges brought on by the Tenda, how how old is profitable and second quarter.

During the quarter, we took several actions to improve liquidity.

Cost structure.

Hey, thanks.

All while holding our customer managed or inventory level.

Decisive actions it was increase or financial capability.

Sure consistency the time of the world experiencing great volatile.

In anticipation of second quarter should have delayed potential production interruption.

Hello, or amended its credit facility during the second quarter.

Allowing us to access our four wall.

This help.

Improve our liquidity the 2.6 billion as of June Thirtyth.

As Larry said, our leverage ratio remained under three times, both on our covenant of four times.

During the second quarter, we were able to reduce production cost 28 94 per ton.

No 9% reduction over the prior quarter.

More cost allowed us to generate solid cash flow was used to pay down 6.9 billion banks that quarter.

And 19 million for the first half the year.

This was accomplished even while our coal inventories grew by 13.8 billion.

Due to an expected slowdown shipments are important.

Coal shipments have improved.

June and July we expect to reduce our core inventory later this year.

On April 16 power received since the $10 million alone the Paycheck protection program TGP.

According to the current guidance from the FDA review as Treasury. However has appropriately qualified was he says.

How are utilized the PPP funds to pay two months of payroll and other cover expenses.

The company expects portion of the long would be forgiving later this year.

Shipment quarter World million 244000 times.

Or just under a 5 million home annualized say.

We have 3.7 billion.

Contract is through the balance of the year.

We think the markets are improving.

So far Henry hub natural gas prices of average.

$1.79.

Year to date.

Yes, the balance of this year.

It was $2 a 47 cents.

And if we look ahead the next year.

Dogs and 75.

So.

That tells us it soon coal will be dispatching.

One of natural gas.

Now improvements in gas prices.

Our due to the market anticipated last gas production 2021.

And Weve certainly seen is say 2090.

One indicator of left future gas production, the dramatic slowdown in oil and gas drilling.

As evidence of the oil and gas rigs as of July 24.

20 were 251.

Versus the peak.

But 80 90.

1000.

80 fiber that's a 77%.

Declines in roughly 18 months.

Got targeted rig.

As of July.

24.

Our 68 versus the peak at 18, 19, Oh, Hundredninety, that's 66% decline.

We all have shale.

The shale oil and gas will decline.

Very quickly.

So we don't think the pace of drilling is keeping up with the pace of of decline.

Those increases the prices, we see going forward.

From a coal export point of view epi for is above $60 in first quarter.

2021 <unk> two.

There's about $60 the third quarter.

2021.

So we see improvement gas within proven coal exports.

The dramatic slowdown in the second quarter.

Appears to be on why the markets are improving.

In summary, despite the higher the pandemic occurring in the second quarter how were profitable.

Shipments are increasing and inventory for excuse me energy markets are improving.

However has a strong correct contract position.

We'll work to continue generating positive cash flow.

Further reducing debt.

With that I'll open it up.

For questions all along.

Thank you.

I'll now begin the question and answer session.

To ask a question you May press Star then one of your telephone keypad, if you're using a speakerphone. Please pick up your handset before pressing the key.

To withdraw your question. Please press Star then too.

At this time, we will pause momentarily to assemble a roster.

Once again as he would like to ask a question. Please press Star then one.

Okay.

This concludes our question answer session I like to turn the conference back over to Brent Bilsland for any closing remarks.

Thank you.

Apparently remarks, the very thorough [laughter].

I appreciate it would take the time listen to our call it will get back to work like.

Thank you Sir Conference has now concluded. Thank you for attending today's presentation you may now.

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