Q4 2020 CONSOL Energy Inc Earnings Call
[music].
Good morning, and welcome the Consol energy fourth quarter 2020 earnings call.
All participants will be in listen only mode.
If you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be the opportunity to ask questions.
Please note that this event is being recorded.
I would like to turn the conference over to.
Mr. Nathan Tucker director of Finance and Investor Relations. Please go ahead.
Thank you Nick and good morning, everyone welcome to Consol Energy's fourth quarter 2020 earnings conference call.
Any forward looking statements or comments, we make about future expectations are subject to some risks, which we have outlined in our press releases and our SEC filings and are considered forward looking statements within the meaning of section 20 <unk> of the Securities Exchange Act of 1930 for we do not undertake any obligations of updating any forward looking statements for future events or otherwise.
We will also be discussing certain non-GAAP financial measures, which are defined and reconciled to comparable GAAP financial measures in our press release and furnished to the SEC on form 8-K, you can also find additional information regarding the company on our website Www Dot Consol energy Dot com.
On the call with me today are Jimmy Brock, our Chief Executive Officer, <unk>, Our Chief Financial Officer, Dan Connell, Our senior Vice President of strategy, and Bob Braithwaite, Our vice president of marketing and sales.
In his prepared remarks, Jimmy will provide a recap of our key achievements during 2020 and specific insights on operations and sales. Natasha will then provide an update on our liability management program financial results in 2021 guidance in his closing comments, Jimmy will lay out our key priorities for 2021.
After the prepared remarks, there will be a Q&A session in which Dan and Bob will be available to participate as well for additional information we have posted a supplemental slide deck on our website in advance of this call with that let me turn it over to our CEO Jimmy Brock.
Thank you Nate and good morning, everyone.
Let me start by stating the obvious 2020 was an extremely difficult year as the demand for our product was first reduced due to a warmer than normal winter and this was then further exacerbated by the unprecedented decline in global energy demand and the disruption of international supply chain due to the Covid non.
Teen pandemic, however, I am very pleased with our resolve as the team remained extremely proactive and we managed to achieve many milestones and advance our strategic objectives, even in the midst of a very challenging situation.
We moved early in 2020 to amend our credit agreement and secured covenant relaxations with our banks and.
Implemented multiple cost and capex reduction targets.
Executed several transactional opportunities to bolster our liquidity and capped off the year by completing the CCR merger with overwhelming shareholder support.
We made net payments of $67 million on our outstanding debt in 2020, despite the reduced earnings versus 2019.
Finally, we generated $53 million of free cash flow in 2020, which we believe is a tremendous accomplishment in the midst of a global pandemic.
I'm extremely proud of the execution of our team as we navigated through the pandemic in 2020, and we believe we've set ourselves up for success as we head into 2021 and beyond.
Let me now provide you with a brief recap of 2020 and how it positions us for success going forward.
First on the ESG front I am proud to announce that the metallurgical coal producers Association awarded US The 2020 excellent and mining award for the best completed refuse field at one of our legacy operations.
This highlights our environmental commitment to the communities we operate in.
We also won the West Virginia Mountains Guardian Safety Award for our underground operations at the <unk> mine.
Our Bailey preparation plant Consol Marine terminal and Knickman project, each had zero recordable incidents during the full year of 2020.
Our total recordable incident rate at AMC continues to track significantly below the national average for underground bituminous coal mines and finished the year, 61% lower than the National average as reported through September of 2020.
Furthermore, on the safety front managing risk from COVID-19 remains a top priority for us.
Consol energy is committed to maintaining a safe and healthy work environment for the employees.
Our families and the community during the COVID-19 pandemic.
Consols mitigation efforts include but are not limited to following CDC and state guidance, reducing transmission among employees and the communities and maintaining a healthy work environment, while sustaining critical business operations.
Now, let me review, our Q4, 'twenty and full year 2020 operational performance in detail.
Coal production at the Pennsylvania mining complex came in at $5 9 million tonnes in Q4, 'twenty compared to $6 7 million tons in the year ago quarter.
The decline was due to the lingering demand effects of the COVID-19, pandemic and the rail supply chain struggled to provide enough crews.
However, it is worth noting that our fourth quarter production was improved 31% from Q3 levels and a 146% from Q2 levels as demand has steadily increased since the depth of the COVID-19 related shutdowns.
We continue to run for loan loss for the entire fourth quarter.
For Q4 of 'twenty productivity at the PMC measured as tons per employee hour improved by an impressive 10, 8% compared to Q4 of <unk> 19 for the full year.
AMC ended with production of $18 8 million tons down from the $27 3 million tons in 2019.
On the cost front.
Our average cash cost of coal sales per ton was $29 49 in Q4 of 'twenty compared to $30 38 in Q4 19 as our operations team was again successful in keeping tight control over our cash expenditures in the quarter.
The adjustments, we made to our operations allowed us to reduce our overall average cash cost of coal sales per ton on our producing assets and to partially mitigate the financial impact of the reduced production volumes.
The improvement was primarily driven by lower mine maintenance and supply cost contractors and purchased service cost and project expenses.
For more the PMC ended 2020 with a cash cost of coal so per ton of $29 12.
Compared to $30 97 in 2019 by successfully limiting our spending and rightsize our operations.
We don't envision this being a one time benefit and continue to expect a sub $30 per ton cash cost structure going forward.
For the foreseeable future, we expect to run for out of our five long hauls.
As we are able to significantly lower operating cost structure, while only losing three to 4 million tonnes from our 2019 production levels.
In short.
We believe the margin expansion offset the volume loss given the current demand outlook in the domestic coal market.
We believe other minds and operators in northern App region are also planning for lower production levels with only a modest production recovery expected in 2021 from depressed 2020 levels.
Accordingly, we do not expect northern App production to rebound to pre COVID-19 levels for the foreseeable future as operators in the region better align output with demand trends.
The Consol Marine terminal had throughput volumes of $3 1 million tonnes during Q4 of 'twenty compared to $2 5 million tons in the year ago period.
Terminal revenues for the quarter came in at $17 4 million compared to $16 5 million in the year ago quarter.
Despite the 600000 ton increase in throughput volumes cash operating costs were improved it for $6 million versus $4 9 million in the year ago quarter.
For 2020, the terminal had a very strong operational performance, especially when considering the difficult market backdrop.
Due to the nature of the takeaway contract 2020 total terminal revenue came in at just below its annual revenue records set in 2019, despite a $2 5 million ton decline in annual throughput volumes.
For the Consol Marine terminal also achieved operating cash cost of $18 4 million in 2020 compared to $21 7 million in 2019 as the terminal team continued to maintain tight control over expenditures in the year as such our two core operations once again prove that they can adapt it.
Any commodity market.
Let me now provide an overview of the coal markets.
Demand for our product further strengthened in the fourth quarter.
Since the trough of the second quarter with economies reopening increased power demand and improved export demand driving the pickup in coal shipments hen.
Henry hub natural gas spot prices averaged $2 53 per million Btu during the quarter for a 5% increase compared to Q4 19.
Spot price Delta on a quarter over quarter basis, compared to 2019 continued to shrink throughout 2020, and this 5% increase and is the first improvement on a quarter over quarter basis since the fourth quarter of 2018 compared to Q4 17.
While natural gas prices haven't sustained at $3 per million Btu, Mark that had been projected by many industry experts due to the anemic start of the winter season in the U S. We are hopeful that the year over year comps in natural gas prices still favor overall demand improvement and higher coal burn.
On the domestic front the.
The fourth quarter of 2020 ended the year on a strong note from a demand perspective.
The U S energy information administration estimates that coal share of the electric generation mix will end the year at approximately 20%, which is improved from the low point of 15% in April and highlights the strength, we saw in the back half of 2020.
IHS Markit estimates that total domestic coal demand will increase by 10% in 2021 versus 2020, while supply will increase by only 5%.
This development could help to further reduce domestic coal.
<unk> and continue to tighten the domestic market.
We continue to see tightness in supply of northern App coal and the majority of our domestic customer stockpiles are at or below normal for this time of year.
On the export front.
We are seeing several very encouraging trends as the seaborne thermal coal markets have steadily improved since the end of the third quarter of 2020.
According to wood Mackenzie.
The la Nina weather cycle played a major role in boosting thermal coal prices in January.
This cycle costs freezing temperatures for much of the northern hemisphere or the major coal demand centers are located as well as stock loans and wet weather in the southern hemisphere, where the major coal exporters are located.
This dynamic caused very tight coal market in early 2021.
Global LNG prices surged and reached historic highs in January as gas face similar issues.
Demand surged due to frigid temperatures while stores dwindled.
This led to improved dispatch economics for coal, particularly in Europe.
We continue to see strength in pet coke prices, resulting from reduced oil production, which is propping up demand and pricing for northern App coal in high CV markets, particularly India.
API two spot prices have also rallied and cross the $70 per ton multiple times in the month of January.
Which is the first time this pricing level has been achieved since March of 2019, driven by recent cold weather lack of wind generation and increased LNG prices as such Europe has again became a viable option for U S coal exports.
Additionally, resulting from a pickup in infrastructure projects and steel production as the world continues to recover from the pandemic recent improvements in global met coal prices are also beginning to translate to a rebound in demand and pricing for our crossover product as well.
From a marketing perspective, it is encouraging to see that the demand for our coal has steadily improved since reaching this low point in Q2 of 'twenty.
We continue to maintain the vast majority of our core customer base and continue to see improvements in the contracting appetite.
Since the end of Q3 20.
Our sales team has successfully contracted seven 2 million tons of new business, bringing our sole position to $18 2 million tons in 2021, and $5 6 million tons in 2022.
With that I will now turn the call over to <unk> to provide the financial update.
Thank you Jimmy and good morning, everyone.
Let me start with an update on our liability management efforts in the context of our capital location strategy I will then review our financial results for 2020 and introduce our 2021 guidance.
Over the past year financial priority has been very clear to maintain strong liquidity and reduce our outstanding debt and improve the risk profile of our balance sheet.
We have remained laser focused on this strategy and have achieved multiple milestones throughout 2020.
We started the year by recognizing our need to reduce discretionary spending to help maintain strong liquidity with reduced PMC capex by more than 50% compared to 2019 levels.
For the majority of our growth Capex abatement metallurgical coal mine located those dollars for debt reduction.
We moved early in the year to work with our banking partners to amend our credit agreement and secured eight quarters of covenant relaxation.
This brought us a lot of time to execute several value enhancing transactions throughout the year, while we maintain strong liquidity levels.
We also negotiated an ability to repurchase our second lien notes without a leverage test and strategically capture the discounts offered in the marketplace.
For the year of 2020, we deployed $32 million of capital to retire approximately $54 million in face value of our second lien notes at a weighted average discount to par of approximately 41%.
This turned out to be an excellent use of capital for us as our second lien prices have rallied back to over 89 come back to us.
Weighted average buyback price in 2020 of approximately $59.
This represents an annual return of approximately 27% if health to maturity through 2025, and an annual interest expense reduction of approximately $6 million.
We believe these below par repurchases for credit positive and liquidity enhancing in the long run.
In aggregate, we spent approximately $86 million in 2020 towards our outstanding debt reduction before accounting for a net $19 million in proceeds from equipment financing.
We also successfully tapped alternative sources of capital in 2020 by taking advantage of a strong equipment financing market and reached $60 million of new capital in the year at a weighted average interest rate of 6%.
In the second half of 2020, we completed multiple transaction that boosted liquidity and improved financial flexibility as we recorded $68 million in pre tax income associated with these items.
For the fourth quarter of 2020.
We recorded $42 million pre tax income in addition to the $26 million recorded in the third quarter.
For the full year, we generated $53 million in free cash flow $48 million of which was generated in fourth quarter, which further highlights our strong finish to the year.
The speed was even more impressive when you consider the economic destruction brought on by the COVID-19 pandemic in 2020.
As a result, we ended 2020 with excess free cash flow of approximately $6 million as defined in our credit agreement and expect to make a payment of approximately $5 million to our term loan b holders later this month.
On the legacy liabilities front, we derisk, we derisked our pension plan for the by taking advantage of a true well funded status and strong performance of our equity assets in 2020 by adjusting the plant's glide path investment policy to increase our liability hedging to growth asset mix in <unk> 'twenty.
In January of this year.
The additional increase in our funded status with regard to our liability hedging fixed income target to further derisk for the plan, putting us at a 35% to 65% equity to fixed income split versus 50 50 split in mid 2019.
Under our current actuarial assumptions, we have are funded status of 99% and lower exposure to equity volatility with no funding requirements for the foreseeable future.
Finally, we completed our merger with CCR with overwhelming shareholder support in late December as expected. This transaction simplified our corporate structure streamline financial reporting and immediately improve our pro forma credit metrics.
As such we ended 2020 with a net leverage ratio of two five times a significant improvement from the ratio of three four times at the end of <unk> 'twenty.
Which included an estimated <unk> <unk> improvement from the CCR transaction alone.
Since the announcement of the merger of <unk> current 30 day average trading liquidity has improved by 218% and its market cap has increased 59%.
This is a great outcome for shareholders of both legacy entities.
As we move forward, we expect to continue our strategy of reducing our outstanding debt as we prepare ourselves to have a significantly lower level of absolute debt for our 2020 for term loan b matures and balancing that goal with our targeted growth strategy.
With that let me now recap the fourth quarter and full year 2020 results before moving on to our 2021 guidance.
<unk> reported a solid fourth quarter of 2020 financial performance with net income attributable to see act shareholders of $13 1 million or 49 cents per diluted share and adjusted EBITDA from $95 5 million. This compares to $13 9 million 54 cents.
<unk> per diluted share and <unk> $92 1 million, respectively in the year ago quarter.
For <unk> 'twenty earnings Mark a second consecutive quarter of significantly improved earnings versus the prior quarter from a low point in two <unk> more importantly in <unk> 'twenty, we generated $67 million of cash flow from operations spent $20 million in capital expenditures.
We received $1 1 million in proceeds from asset sales, which resulted in free cash flow generation of $48 million.
As a result, we ended the fourth quarter with cash and cash equivalents of approximately $51 million a substantial improvement from approximately $22 million at the end of <unk> 'twenty.
For 2020, we reported a net loss attributable to <unk> shareholders of $9 8 million adjusted EBITDA for $261 5 million and incurred capex of $86 million.
<unk> finished the year with a net leverage ratio of two five times.
Most importantly, we now have substantial cushion against our financial covenants and ended 2020 with access to a $401 million volume credit credit facility with no borrowings outstanding.
Now, let me provide EBITDA outlook for 2021.
I am pleased to announce that with improved visibility in the marketplace. We are reinstating our historical practice of providing full year guidance to all our stakeholders.
For the PMC.
Not expecting our 2021 sales volume to be improved compared to our 2020 levels. We plan to run for the market in 2021, while focusing on generating highest margin as possible.
As such we are providing a 2021 coal sales volume range of 22 to 24 million tonnes.
The upper boundary reflects our belief in a sustained improvement in the coal markets in 2021, which will allow us to run at or above our <unk> 'twenty tonnage levels.
And capture spot market opportunities the lower boundary considers that reduced the ability to sell spot pools, if domestic or international demand trends weakened.
On the pricing front. We currently have a 2021 contracted position of $18 2 million tonnes at an expected average price of approximately $41 56 per ton.
Rooming in average PJM west power price of $24 79 per megawatt hour.
It's worth mentioning that these netback power price linked contracts are essentially at the floor and our new projections.
And are reflective of current power markets.
The price change versus our last earnings call is mainly driven by a reduction in PJM west power price forwards versus unexpected price of $29 83 per megawatt hour at that time.
We expect our 2020 average cash cost of coal sold.
To be 27 to $29 per ton as we expect to build upon our success in reducing our cash cost in 2020.
At the midpoint, we are expecting our cash cost to be improved by nearly $3 a tonne compared to 2019 levels.
We will continue to focus on ways to reduce cost and improve efficiencies.
Finally, we are providing our capital expenditure guidance range of $100 million to $125 million, excluding spending on late mid metallurgical coal project. This range reflects a modest increase in spending on equipment related items and structures of the PMC as we ramp up production versus 2020 levels.
We are exploring several options for our <unk> project, and we will continue to balance our growth needs with deleveraging needs through our capital allocation framework with that let me turn it back to Jimmy to make some final comments.
Thank you for attached.
Before we move on to the Q&A session. Let me take this opportunity to lay out some of our priorities for 2021.
First and foremost our strategy has always prioritized a strong balance sheet and 2021 will be no different.
Access to capital for coal companies has been shrinking over the past several years and we anticipate this trend will only worsen. Therefore, we will continue to prioritize our main objective of reducing our absolute debt levels by the time, our term loan b matures in 2024.
Second despite the improving coal market dynamics, we expect a continued need to strike a balance between maintaining adequate levels of liquidity and making further progress towards our debt reduction goals as such we are remaining laser focused on continuing to drive down cost at our operations in <unk>.
Corporate levels through efficiencies and a focus on reducing discretionary spending.
This is also evident in our Capex guidance range that <unk> discussed, which.
Which is only modestly above 2020 levels and remains within our targeted for two to $5 per ton range.
Third we expect to continue to pursue our targeted growth and diversification strategy as we move into 2021 and beyond.
We remain excited by the tremendous potential that each of our current endeavors could bring whether it is our partnership with <unk>.
<unk> universe, CN engineered profiles and the coda product space, where we've begun to see positive R&D breakthroughs, our partnership with Omnicell Bailey LLC on our omnibus project, which is well underway with construction of its first commercial module to convert our Bailey preparation plant waste Koestler stream and.
For a sellable products or our Doa selected.
Selected coal first project that is evaluating the possibility of constructing and advance coal based power plant of the future in the vicinity of our Pennsylvania mining complex.
While we're while we're still in the early stages of the majority of these projects. We believe they provide an exciting opportunity for us to help define the future of our industry.
However, our most important growth and diversification vehicle remains our metallurgical coal project in southern West Virginia.
Although we've pulled back spending in 2020 to focus on our liquidity and debt priorities. We remain extremely excited and committed to this project.
We will continue to progress with development mining, where we're operating a single section one ship per day at minimal cost while at the same time continuing to evaluate all options associated with ramp from the project back up.
We believe this project provides a solid pathway for organic growth and diversification.
Finally, I would be remiss, if I didnt mentioned the importance of completing the CCR merger at the end of 2020.
This transaction improves our financial flexibility as we move forward and will afford us the ability to fully implement our strategic goals.
Now that our shareholders are fully aligned.
We would like to thank all of our shareholders for their overwhelming support and approving the transaction.
Before handing the call over I want to end by thanking our entire workforce from our operations team to our corporate staff for their hard work and dedication over the past year 2020 was a challenge on many fronts together, we navigated the COVID-19 pandemic from the unprecedented demand destruction are in.
Industry face to the new social distancing measures to our corporate staff working remotely for much of the year, which we are continuing to do well.
We had to learn grow and adapt throughout the year.
Can't thank our employees enough for their professionalism and willingness to quickly pivot as needed with that I will hand, the call back over to Nate for further instructions.
Thank you Jimmy we will now move to the Q&A session of the call. Nick can you. Please provide the instructions for the callers.
Well I'll begin the question answer session.
Vascular gross you might for a star then one on your Touchtone phone.
For using a speakerphone, please pick up your handset before pressing the keys.
Withdraw your question. Please press Star then two.
At this time, we'll pause momentarily to assemble the roster.
First question is from Lucas pipes B Riley Securities. Please go ahead.
Hey, good morning, everyone.
Good morning Lucas.
Yes, Jimmy I think you mentioned.
The answer to my question in.
Last comments there.
And it's about optimal capital structure.
Can you can you kind of.
Remind everyone.
What's what's the goal is that by 2020 for no debt at all or a minimal amount of debt clear.
Clearly.
Net financing has become more challenging for coal company. So would appreciate your thoughts on that day. Thank you.
Yes.
Lucas I'll take that one so for.
For the half challenge in 2020 was we did reduce our debt by $56 million. So my goal is like looking forward at least do that in 2021, if not more I think longer term, where we want to get too.
We have two pieces of what I would call. It us non amortization significantly non amortize any debt which is dominant.
Second lien.
We would like to get that to one piece by.
By the refinancing so we don't have much of an uphill battle and remember our dominant area has a mandatory amortization.
So that will amortize in due course, you saw we made significant payments on our term loans.
In 2020, I think about $23 million. So we are hoping by the end of 2023 term loan would be all over and on term loan B and second lien I would get down to like probably one piece of paper when it comes from refinancing and that too.
At a smaller size hopefully.
Got it.
Understood. Thank you for that and then.
<unk>.
On the volume side I appreciate the guidance here for 2021.
Okay.
Yeah.
Was hoping you could maybe expand on kind of how you think about marginal.
<unk>.
For Consol, specifically so.
Kind of when I look at the cost curve you're at the very low end. So are you ceding market share are you just responding to.
<unk> demand around you in North America.
Could you could maybe still makes sense to ramp up production in response to strong extra volume, but really just kind of.
Appreciate additional color on that.
Specifically again, how we should think about marginal economics.
<unk>.
In the context of your volumes. Thank you.
Yes, well the guidance that we're giving for the 22 to 24 million tons is what we know now and what we see in the future. Obviously, if the markets come back very strong and Theres a need for more tonnage we would have the opportunity to put that for us longwall back into operation that we have.
But what we've found that in this exercise youre always tell people that.
Severely downturn into markets Avalon coal mines, it's very tough to do but out of that comes from opportunities. So the one thing that we've seen in this is that we were able to reduce our costs significantly enough. If we can continue to do that you don't have the capital expense of that fifth longwall you don't have.
Some other opex expense associated with that and you can run the other for really hard to worry you only lose I think we mentioned the three to 4 million tonnes of production volume, but at the same time, you can increase that cash margin significant enough then it should make get us in the same kind of ballpark of what we work for us at the end.
For the day really doesn't matter about the volume it's all about the cash margins that we can create so we're constantly evaluating those and trying to do it now I will say that it also helps when you do bring on additional volume if it's at the right price and at the right cost structure. So those are things that we will continue to monarch.
We will continue to look at.
The marketing team comes to us with a real strong sales we see that in Q4, something then we would start ramping back up if we need to but our goal moving forward is going to be to run. These for longwall. So as hard as we can as cheap as we can and create the highest margins we can for the coal we produce.
That's helpful color. Thank you Jimmy and then.
Last one for me for now is on the export side encouraging comments you shared with us.
First for as part of the question.
In your contract.
Volume for 2021, other export volumes better than that and then.
Secondly, which you'd see exports from the current price environment for.
<unk> 2021, thank you.
Lucas I'll take that.
Today, we have just south of about 5 million tons booked in the export market of the $18 two that we mentioned.
On our call today.
My expectation is with this cold weather upon us now natural gas prices, where they're at.
We will see a spot market for domestic coal in 2021, but I will say that so long as these export markets remain strong and pricing remains strong.
He is taking majority of that coal to the export market that we have left to sell.
And as you know we are the only ones in the game here that can pivot back and forth.
The ownership of our terminal in Baltimore.
Again, a little foggy right now of exactly where those those tons, we place, but we do feel very confident moving forward that the 24 million ton.
Our guidance that we gave at the upper end is achievable.
The prices today on the export side are slightly better than what the published marks are for.
For our domestic product and I think you probably have seen that most of the publications now for our product are in the are in the low <unk>.
So the export market is realizing higher prices today and if that continues we'll continue to look to place those tons into that market.
Very helpful. I appreciate all the color everyone and continued best of luck.
Thank you Lucas.
Thank you. The next question is from Nathan Martin of the Benchmark Company. Please go ahead.
Hey, good morning, guys.
Congrats again on a completed in the shipyard transaction.
The lower larger costs.
Workers' comp connect volume.
Lucas kind of touched on my question.
The color there Bob on the breakdown of that.
Your exports versus domestic and broker contracted tons and your for your sales guidance I guess, maybe if I can dig in a little bit more as it relates to the actual business for you.
Prices have you guys called out there whenever that $70 Mark last month pet Coke prices remain high.
Alright.
But maybe I think Bob you mentioned export prices or maybe a little bit higher than the low forward as to what we're seeing or anything from kind of cash.
Later for Gary comment on how you calculate the net backs and when Youre looking at those export markets.
Growth objectives versus Becker.
Yes.
We can we can provide that information to you, obviously theres a rail component and a vessel component involved in that so some of Thats <unk>.
Confidential, but I would just simply say that.
Mid $60 <unk> number basically gets you to that point.
I will say that we were opportunistic when the API two market did.
<unk> the $70 Mark here earlier in January we took advantage of that and we secured two cargoes to Europe.
For delivery in the second quarter and make note that that will be this is the first these are the first cargos that we secured to Europe. Since November of 2019, So again very excited about that.
And then as far as.
Most of our coal going to India that goes into the retail market, specifically, but also now with pet coke prices at for year highs, we're now sending some coal into.
And to the cement market as well and also with the improvement in pet Coke prices.
It actually brought us new opportunities to cement plants across the globe. So we are diversifying our export business now as well outside of our traditional markets in India, and Europe, which is very encouraging.
But when you look at the India pricing I will say, it's higher than the number I just quoted you in the mid sixties.
So again to give you a flavor youre looking at a low to mid 40 type number.
At those levels.
Got it got it thanks, Bob I appreciate all the all for color there.
And then just maybe kind of shifting gears real quick going back to that.
Non project.
Jimmy you called out and we think Thats still kind of remains your best gross profit going forward.
Just curious for what it would take for you guys to decide to start committing more capital to that project and move forward moving forward there.
Yes, as we see the markets continue to improve particularly on the met side. One thing that we can do quickly. There is we can double our production just by adding another shift that we have there now so we're running the one shift we already have the equipment in place and everything else, but looking at the bigger picture.
We're still evaluating several options that would get that for.
<unk> up and running.
Where we want it to be run at those production levels that would be somewhat significant.
Given.
<unk> will be run in three sections are at full production. We think we can produce somewhere between 800 900000 tons. Once it is ramped up obviously there are some things that we got to do and we're evaluating those right now but stay tuned on that front I would think.
Possibly later this year, we'll have some clarification on that but it is a very exciting project for us. It's a great quality of coal we think when you put it in the marketplace and were just evaluating how we do that at the lowest capital cost and there is three or four moving parts. There that we should have some clarification on per design.
Got it.
Thank you guys saw for Utah.
I'll talk for Vincent.
Okay. Thank you as well.
Thank you for the next question from.
Okay.
Capital. Please go ahead.
Yes, hi, good morning, guys.
Yes.
A couple of questions on the 'twenty, one guidance and I realize there's still uncertainty out in the world.
We don't know.
But as I sort of up the numbers together and im looking mainly at free cash flow.
It looks like it could be.
A little more than in 2020.
And that.
I mean, there has been there has been a really strong strengthening trend in the export market.
I understand typically a high margin market for you guys when the Windows open and.
So it doesn't if that just the high end of the guidance as I understood. You're saying is just like that where we are now doesn't deteriorate not even if it were to continue in the direction. It's been going so I mean in my in my numbers basically in the ballpark to say that the cash flow could be up somewhat from <unk>.
Or perhaps somewhat better than that if the international market continues to strengthen.
Yes.
For its unfortunately, we don't provide cash flow guidance, but some of the moving parts I think that you should definitely.
Keep in mind is obviously, we are guiding to a higher production level and higher sales level.
Our pricing is given the comments from.
From Bob here could potentially be higher as well the offset to that would be we might not have the same kind of transactional opportunities that we had in the past.
But we are optimistic about our free cash flow generation capabilities.
Capabilities and.
As I mentioned earlier, we're looking forward.
To make sure that we continue to strengthen our balance sheet.
Okay. Thank you.
Yes.
Okay.
Thank you. The next question comes from Brian Kennedy at Wells Fargo. Please go ahead.
Yes.
Hey, guys. Thanks for taking my question I really appreciate the guidance on 2021 for the Pennsylvania mining complex.
I was wondering if you guys would potentially provide some more color on where you see terminal revenues going and the cost structure. There and then if you potentially see opportunities for more asset sales or if that's kind of done at this point for now thanks in advance.
Yes. This is Dan I'll take the terminal part of the question to get started so we have had a major take or pay contract in place at the terminal for the past few years. This year, we have a little bit different of a of a contracting structure, but fundamentally nothing has changed Jimmy said in the past.
We really use our terminal for for three main purposes strategy revenue generation and storage space for our Pennsylvania mining complex product that is going to stay the same this year and going forward when we look at volumes and revenues.
We expect this year to have those anchored by strong exports from the Pennsylvania mining complex.
I think Bob mentioned before about 5 million export tons currently contracted with <unk>.
Probably another $3 million to $4 million plus.
In the cards, if the markets stay strong on top of that we do have third party commitments.
For up to 5 million tonnes of exports in place and more than half of those are secured by by take or pay commitments. So little.
A little bit different scenario this year, but.
Think we we're seeing strong business through the terminal in Q1, we expect that to continue as long as the export markets.
Remain robust and are expecting.
Another solid year for the terminal.
I'll take the transactional opportunities question.
Like like in the past, we always look at our portfolio and see that as a possibility of bringing value forward.
Last year was a good year for us, where we were able to deliver on several items.
I will tell you we're not done yet, but it is fair to assume that it's not probably going to be as big as last year for now.
But we are working on several things, which which could materialize over the course of the year I think there are several things in the pipeline on that aspect as well.
Awesome. Thank you Beth and then just one more question kind of shifting gears a little bit.
<unk> had a muni deal that was supposed to come to market late last year do you have any update on what is going on with that or.
Just any color you can add would be greatly appreciated.
Okay.
So Brian during our regular course of business, we look at several financing opportunities at any given point in time.
Our goal is to figure out what makes sense for the business what gives us improve.
Improvement in liquidity improvement on balance sheet. So we look at several items during any given diamond.
Sometimes they play out sometimes they don't.
I mean, our second lien debt throughout most of last year was trading at a weighted depressed level. So there were some real headwinds.
True to any potential financing.
That is not the case anymore.
We could look at other things this year and see what makes sense I think that's all I can say on that matter.
We'll continue to explore.
Other sources of financing like we always have.
For several opportunities that we can work on.
Understandable. Thank you so much for Josh I appreciate it.
Thank you.
So again, if you have a question. Please press Star then one.
Next question is from Lin Shen Hite. Please go ahead.
Hey, good morning, Thanks for taking my question I have two questions first one is for your 2022 volume.
Of contract of $5 6 million times can you talk a little bit brought to.
Is it price similar to the 101 or what do you see the price there.
Yes, we are.
We don't really talk about pricing, obviously, we didn't disclose that but I would say, it's a slight contango to what we currently are seeing for 2021.
Got it and also.
When I look at it.
Our cash cost to serve you on legacy liability I think.
For the fourth quarter.
The cost was about 17 million or so for.
For.
Our fourth quarter, I think thats, a good runway for 'twenty 'twenty one annual.
Cost.
And then are you talking about the legacy liabilities like employee legacy liabilities that we typically report on.
Yes, I think like you are like a statement you reported net cash payment for legacy employees that day, but yes, yes, that's right.
Yeah. So just so you know.
For the full year 2020, I mean quarters could be lumpy. So I would I would give you a full year perspective for the full year of 2020 cash servicing cost for legacy liabilities, including asset retirement obligations was about $65 million.
Also on the slide deck that we have posted online.
We do believe that over long time, our legacy liability cost is going to continue to come down and as you can say as you can see just from the employee portion of it.
Our actual costs for 2019 was $61 million it was down to like 51 and 2020.
We expect it to continue to decline I think for 2020 for guidance for just the employee portion of the legacy liability that is in the slide is about $49 million.
So.
Does that answer your question Oh, yes, great. Thank you I didn't see the slides I guess.
Okay I appreciate it thanks, Novartis, we didn't make.
Make any reference to it on the script, but that was a good question.
Right.
Yeah.
This.
A question and answer session I would like to turn the conference back over to Mr. Nathan Tucker for closing remarks. Please go ahead.
Thank you Nick we appreciate everyone's time this morning, and thank you for your interest in and support of CX. Hopefully we were able to answer most of your questions today and we look forward for our next quarterly earnings call. Thanks, everybody.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.