Q3 2021 Hallador Energy Co Earnings Call

Good afternoon and welcome.

G Company third quarter 2021 earnings call.

All participants will be in listen only mode.

If you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be opportunity to ask questions.

Please note that this event is being recorded.

I would like to turn the call over to MS. Becky Palumbo Investor Relations. Please go ahead.

Thank you Ned and Hello, everyone. Thank you for taking the time to join us today.

A reminder, this event is being webcast live and it will be available on our website later today.

Yesterday afternoon, we released our third quarter 2021 financial and operating results on Form 10-Q, and issued a press release containing certain financial metrics.

Both documents are posted on our website today, we will discuss financial results and I perspective on market conditions and outlook.

Following the prepared remarks.

We will open up the Coca question.

And as a reminder, some of the remarks today.

Forward looking statements that are subject to a variety of risks uncertainties and assumptions.

And I was feeling from time to time with the SEC.

While these forward looking statements are based on information currently available to us if one or more of these risks or uncertainties materialize or if our underlying assumptions prove incorrect.

Results may vary materially from those we projected or expected.

In providing these remarks, we have no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise required by law to do so.

With us today are Brent Belzberg, our president and CEO and Larry Martin Our CFO now.

Now that we have the required preliminaries out of the way, where you can start us off with the quarters financial overview with.

The floor is yours.

Good afternoon, everyone.

Before I begin I'd like to get some definitions are defined we.

We define free cash flow as net income plus deferred income taxes, plus depreciation depletion and amortization.

Reclamation accretion change in fair value of hedges and stock compensation less maintenance capex and the effects of our equity method investment.

We define adjusted EBITDA as earnings before interest taxes, depreciation and amortization plus stock compensation, plus reclamation accretion and changes in fair value of hedges less the effects of our equity method investments.

Hello door.

Obtained net income of 8 million for the quarter were 26 cents a share.

4 million year to date for the nine months were 13 cents a share our free cash flow for third quarter was $14 6 million and $26 4 million for the nine months <unk>.

Adjusted EBITDA was $20 5 million for third quarter, $43 2 million for the nine months.

We did we paid down bank debt of $15 2 million for the quarter $22 8 million for the year.

Our bank debt at 930 was $115 million and our net debt at 930 was 110 million our debt to EBITDA leverage ratio was 2.29 times well within our covenant.

I'd like to now turn the.

Call over to our house, where C E O Brent building.

Thank you Larry.

2021 began slowly, but well finish very strong for Howard or the.

In the first half of the year, we shipped 2.6 million tons and then the last half of the year, we anticipate shipping three 6 million tonnes.

Those total shipments should come in around $6 2 million for 2021.

This.

[laughter] improvement in Pes when looking at third quarter results year over year, our revenue increased by 22% and our shipments increased by 29% in the third quarter.

Shipments outpaced co production in Q3, and coal inventory was reduced by $21 million.

We expect to produce five seven to $5 8 million tons in 2021.

We're currently ramping up production to 7 million tons for 'twenty, two and 'twenty three.

We have all the equipment, we need we just need more people.

We added a 94 employees in the month of October and we are focusing on hiring another 110 in the next two to four months.

Once complete new employees will represent roughly one fourth of our workforce will.

It will take a little time in training before this new workforce becomes efficient.

And cost decline.

Focusing on cost Q3 production costs were elevated at $33 15 per ton, which is $2 95 over the prior quarter and $3 85 per ton over Q3 of 2020.

The reasons for these increases are as follows.

The operating phase two is now 10, and a half miles away from the portal requiring long underground travel times for our workforce.

To combat this we are finalizing the construction of an.

An employee and supply hoist is expected to be operational here are actually today.

Which should reduce our labor expense or substantially, particularly at one P. M. Two.

Additionally, we've been developing new underground days that it required a lot of additional support in labor.

This work is necessary, but unfortunately, it's not very productive from a coal production standpoint.

This work should also be completed this month.

We've experienced a few supply chain disruptions from our vendors, causing us to pay premium prices for some of our inputs.

We expect these premiums to remain in 2021 and dissipate throughout 2022.

Our ace in the hole mine is reaching the end of its reserve life and we'll mine out in November of 'twenty one.

Ace is responsible for about 50% of our elevated cost structure during the quarter we.

We expect to open a new pit for ace in the hole in 2022.

We expect our production costs to stay elevated in Q4 and returned to normal sometime in 2022.

He becomes operational supply disruptions dissipate, our workforce matures and our ace in the hole mine transitions from an old reserve to a new reserve.

Okay.

Focusing on cash flow and debt increased shipments and draw down of our coal inventory created strong cash flows during the quarter, which we utilized to reduce debt. During Q3, we generated $24 1 million of operating cash flow and pay down our bank debt by $15 $2 million.

I'd like to point out when you have 30 million shares 32 6 million shares that's significant.

A paydown of debt.

Our liquidity improved to $41 7 million in the quarter and our leverage ratio decreased to 2.3 times at the end of the period.

Looking at the markets are all markets have gotten substantially stronger as the year has gone on.

Yeah looking at gas.

Last year.

The average price for that for Nymex gas in 2020 was under $2.

That's the lowest average in over two decades, just to tell you how tough 2020 was.

And then basically the first half this year kind of became the dig out.

Or the recovery from that and we saw Nymex gas prices on.

Average $3.

Uh huh.

And in April of 'twenty. One is the 12 month forward curve then it jumped up in August to 370 <unk>.

In November here has climbed up to $4.43.

So.

A lot of the strength in this market.

It is based on the price of natural gas, which are you know prices really are quite strong.

Through 2024.

Coal export prices have also increased rapidly in April we saw a P. I for which is the Asian market.

Q3, 2021 was $86.

By October that increased to $102 a ton I think last night it was up to 108.

So we're seeing stronger prices in both Asia and Europe.

We outline more of those costs in our Q.

Since the beginning of 2021 pricing for all forms of energy has dramatically increased.

Most importantly, natural gas prices have improved to a point, where coal has been large amounts of market share for electricity production in 2020 one M. B are.

There had been many headlines discussing higher coal prices around the world.

I. Thank all of you are interested in what does this mean for how old are presently.

And long term.

As previously discussed our.

How old are shareholders will see a strong finish to 2021.

And were expecting higher prices in the fourth quarter.

Somewhere in the $2 70 to $3 range.

Next year, we expect our margins to be slightly better than 2021, but with shipments 13% to 15% higher.

7 million tonnes.

In 2023, we believe we will maintain sales at 7 million tonnes and see substantial margin improvement as legacy contracts roll off and are replaced by tons that are being priced at today's market.

'twenty 'twenty four is a little far out to know market prices, but presently the gas curve is over $3.10 as of last night.

Price, where coal dispatch in front of natural gas in most of our markets.

So we believe the next three years will be very strong from a sales perspective.

And at the end of that time period, we should be at or near debt free.

How long will there be demand for coal is a question that we.

We get often.

And I think something here that popped up as of late.

Speak loudly.

On October 27th the MISO independent system, operator, MISO, who manages indiana's and 15 other states electricity grid.

And now it's been an emergency declaration is likely.

It's harsh weather collides with unforeseen power generation outages in the next three months.

Further stated that they have modeled a number of scenarios that could cause this to happen.

MISO is simply very tight on capacity.

Causes of this causes us to believe that.

Coal fired Baseload generation Gen.

Generation that has an on switch will be needed much longer than many of the headlines what how do you believe.

I mean, if we sit here with all these coal plants on today in MISO was warning of a an emergency situation.

Starting in December.

What happens when you start down started to shut down some of these generators that have on switches and replace them with things that did not have on switches.

Which is why MISO estimates that its grid will not reach 80% carbon free until 2050.

It's 28 years from now.

That's what I believe how it or is well positioned to continue to generate positive cash flow for many years to come.

And with that I will open the call up to questions.

Again, if you have a question.

Please press Star then one well now begin the question and answer session basketball flashy make Paas father, one where touchtone phone using a speakerphone. Please pick up your handset before pressing the keys.

First of all your question. Please press Star then two.

Time, we'll pause momentarily to assemble the roster.

Yeah.

First question comes from Austin Schapper Castle Nye. Please go ahead.

Hi.

Thank you for taking the question you made the comment that in 2023.

Youre selling some volumes out.

Today's market prices can you talk about today's market price.

Also talk about whether or not you're seeing your customers extending the terms of their contracts.

So as far as.

Market prices are.

Substantially higher.

Randy New business.

And I think the thing that we want to point out here and why we talk about the future is.

We have a small open position for next year, we're in negotiations with the customer to fill that we're very confident.

We will get that done and if we don't quite frankly, we were confident we've got other buyers behind them that we'd like to have that full.

We just didn't get the deal completely before our earnings.

But.

You know the issue is we have so we're going to ramp up production, we have the equipment to do that.

But for a price increase we will see a price increase we're seeing some cost increase so we think our margins are slightly better next year.

But we think our margins are much much bigger out in 2020 three.

Because we just have so much open position right, where we're replacing.

Yeah, we're pricing up a much larger percentage of our sales versus what we're doing you know.

Here in the third quarter over here here here in 'twenty.

2023, we will see more pricing increase.

A quarter of 'twenty one.

Oh.

But we just didn't have a huge open position in 'twenty.

'twenty two so.

We're seeing volume increases that will help our EBITDA.

Uh huh.

You have inflationary pressure on one hand, we had some condition issues here in the third and will carry a little bit into the fourth quarter that will dissipate.

And we're already basically coming through those issues.

But and then as our volumes increase we are hopeful that our cost structure come back down. So we think margins are slightly better next year, we know volumes will be higher we know volumes would be higher in 'twenty. Two we also.

We believe that our margins have had a significant.

Increases out in 'twenty three.

24, we really haven't.

Spent a lot of time pricing.

Co out there we have we have where we are about the books of business out 24.

And you know again gas prices kind of wood.

Our competitor and the curve still looks really good out there so we feel good.

You know our business has materially.

Materially improved.

Looking out over the next three years.

And we feel that from a.

Deleveraging scenario.

We did a good job of deleveraging in this quarter, but.

But we see a much much clearer visibility.

And Oh.

Free cash flow and paying down debt over the next three years, just because the market is so much stronger.

So so we're happy about that.

Got it that's very helpful.

And where today's spot prices.

Well again, we've got ongoing negotiations so.

We don't really spend a lot of time talking about what spot prices are today I would say you know and what time period are you talking about there seems to be.

Dramatic differences I would say.

What's unusual about this period of time is I think the market's still very short coal.

Now going into winter.

And pretty much.

Yeah.

We believe the market to be pretty much sold out and.

And we believe buyers to still be short.

You've got MISO, saying that.

If it gets cold in there the unsuspected outage of a generator and anywhere in the system, they're gonna have emergency situations when capacity is tight.

Right, we've seen a lot of headlines about headlines about.

Replacing generation, but.

I don't I don't see how you do that when they are so tight now.

So we feel that.

Yeah pricing is much stronger.

And you.

You know quite frankly, we think these assets have to run for many many years and in MISO.

Agrees with it Unfortunately, MISO doesn't hold press releases every week and say it very loudly but.

That's what that's what they're saying and if you look in their publications.

You can find that.

Got it now that's very helpful. And then just thinking about again on 23, you sold at roughly a little under $4 million stocking is pretty seven 7 million amount 3 million you haven't sold as of today at times is it fair to think on those on that $3 million of volume.

We could think 50 kind of 100% prices higher than today's level.

50% higher than today's level.

Ah well.

That's.

I'm not quite sure how to answer that because I'm not sure. What you mean from today today's level today's average price.

Yeah, I think that.

I think that.

Uh huh.

Again, we're still negotiating that so I don't I don't really want to speak to what that price is we just know that.

Yeah, that's gonna be.

Significantly higher what does that do to our average price are I think you'll see our average price move up.

You know.

Somewhere in that 10 to 10% to 15% range out in 'twenty.

23.

Thank you very much.

Youre welcome Thank you for calling.

Yeah that'd be have a question. Please press star then one.

Our next question comes from Lucas pipes of B Riley FBR. Please go ahead.

Hey, good afternoon, gentlemen, and thanks for taking my question.

Frank I wanted to touch you know I also wanted to touch base on the pricing side, and maybe hone in a little bit on on.

In Q1 versus 'twenty, two if if if I recall correctly.

You mentioned, there's going to be that $3 per ton price increase in the in the fourth in the fourth quarter, and then and in 2022 the average contract price they would.

Tropicana had a little bit what led to that dynamic that's a little unusual kind of.

We are in the market and would appreciate your perspective on that.

Yes.

Well I think what we're seeing is.

We have some spot tons in the fourth quarter.

We thought some of that would you exit the third quarter, I guess, a little of it but not as much as we thought would ship.

Third quarter.

So.

Well, we just have a higher concentration of those higher prices hitting the fourth quarter. So the mix.

Of Windows of Windows Tom's got shipped.

When you look at the first quarter of next year, you're going to have kind of a mix.

It makes a carryover.

20.

One into 2022, you got new contracts beginning so the mix is just different Lukas I mean, that's that's kind of what we see there.

Got it.

Got it.

That's that's helpful and and how many tons do you have left to sell for 2022.

Okay.

Oh, well, we're quite frankly, we're trying to figure that out and that's part of what the negotiations about so we're producing.

No.

We're gonna produced five seven to $5 8 million tons for the year we've got.

We're in that ramp period now, we're probably at about $6 5 million pesos.

So as we speak.

We just hired 94 employees in Alaska.

40 days, so we're trying to get those people trying to put in position we've got the equipment to ramp to seven maybe a little more but the question comes down to how fast can we hire.

Which has really been strange because we act.

Paul.

Through September.

Although we were unsuccessful in our hiring practices through September and then we had a fantastic October.

By getting the word out you know, perhaps some of the government money finally dropped drying up in early September you know allow those people to take a few weeks and then they can come back to the employment lines.

So.

We feel much happier because we hired so many people in the last one.

Just call it five weeks right.

So extrapolating that out you know you would say well gosh, you hired almost 100 people in a month they ought to be able to hire another 100 people in another month, we just don't know the answer to that.

Right is that going to take us, we'll hire them all tomorrow, if we find the right candidates and we feel that.

And we've got to work we've got the sales we've got the equipment. We're just trying to get the right people in seats and get them trained and it keeps us safe and efficient operation. So.

We don't have great certainty as to will we be able to do that over two months, we'd be able to do that over four months.

What we're trying to gauge.

And that will drive how many tons, but we have the sale next year, but we're targeting.

A 7 million ton so.

Got it.

And so should I understand your.

Just to figuring out process is that on the.

Kind of capacity line, meaning how much can you scale up or is that also on the revenue line and dependent on negotiations with customers.

I'm, sorry could you repeat the question I didn't quite.

Catch all of it is it is it really only is.

So is is what you have left to sell.

Spending on scaling up getting labor in place or is it also dependent on Getty.

Getting the right price.

When you talk talking to your customers.

So the question is like is is is is or is this additional production capacity, bringing on additional people contingent upon a certain price level.

For example, there will be a customer.

No the price level is.

More than sufficient to justify bringing on additional employees.

You know in this market is going to be strong.

For a while because.

We don't think our we think our customers are going short in the winter.

We don't think they're getting.

All the cobalt that they need for 2022, but we're not gonna be it doesn't look like to us they can build inventory in 2022.

So 2020 three.

It's probably the first chance they get.

To have a building here now all of this you know, it's weather dependent market dependent and.

You know I've sat here in November.

19, and they've never heard of Covid. So you know things happen to change that but from what we have today.

As we have the strongest market that I have seen in the history of my career.

Yeah, we've got.

Elliot that's in here, who leads up all of our sales has been doing this for you.

L. Three decades I think he would argue is the strongest market we have ever seen.

So.

Will that dissipate yeah that'll dissipate in time will dissipate tomorrow is it can't just simply isn't enough tons.

The capacity.

Nobody's, putting in new mines.

Right. So the capacity is.

You know, you're you're seeing people go out and kick the tires of old clothes high cost mines, and say well gosh, it's permitted.

So kind of reopened us could I get equipment.

Hard to get it get labor labor is hard to get.

And then how long a contract can I get it.

So those are all the things that people are away and we've looked at other projects.

We wouldn't even thought about six months ago, because they were so far out of the market, but the market is strong enough that it justifies it.

So as we looked at it and as we've looked at other projects. We have said look the number one thing we can do.

His hire people right, we have not equipment, we have infrastructure, we have all of that plays the quicker we get people in place.

Our cash flow comes up and the more times, we have to sell so got it.

We'd like to provide more color on that Unfortunately, we're right we're right in the middle of some pretty significant negotiations so we can't.

[noise] elaborate too much other than to say the general trend is we're going to finish strong in 'twenty. One we're going to run more times in 'twenty, two we're going to run more tonnes and see significant margin appreciation in 'twenty, three and Theres nothing right now that tells us that 24 won't be healthy.

It's just we're not pricing a lot of tons out in that in that period. So.

We're still seeing the market be you know.

Two to three year commitments is what we have seen so far.

Occurred about the market's going to 10 year contracts.

But we have not experienced that.

Very helpful. Brent.

I'll have another question and I'll jump back in queue and odd on the labor side, you know what you said yet successful month of hiring.

How is that integrating.

This new workforce into the mine is whats the scale level.

What's the what's the impact of productivity scaling up.

With with new folks.

Yeah.

Well.

You know we're trying to look like I said, we had about 30 employees, we're trying to hire I think to Tim.

If youre looking at end of September to wherever try.

That's 840.

No.

Half of that let's say 100 are new people that have never been underground before at 100, our experienced people.

And I've got 100 experienced people, probably 50 of those that worked for us.

But the grass is greener somewhere else and come back.

So oh, yeah, we we've done this before.

Yeah, we just don't expect them on day one to be.

Yeah.

Really clicking.

Does that take a quarter or does that take two quarters, it's somewhere in there.

Poor slow we've got another you know.

600, and some odd employees that are very well experienced very very much aligned with what how we think.

Yeah.

Yeah.

It is blocking and tackling it's not something that we're afraid of.

We don't have that.

With clear Crystal ball on how quickly we can hire another 110 people.

That'd be 30 days or that could be 120 days.

It's somewhere in there you know we've.

We've got Thanksgiving coming in we've got Christmas coming and we've got new year's coming to.

These people.

No.

Not as active switching companies are coming to work for us during the holidays and say well I'll start after the first of the year.

We just don't know the answer to that and this is a very very tight labor market.

<unk>.

So much better today than I did a month ago.

So we would we were trying to hire.

<unk>.

August and September and we just we weren't having the success. We think we've found a winning combination we hope we've found the winning combination but.

So until we've delivered it we don't want to over promise to anybody.

Okay.

Very helpful. I appreciate it. Thank you for your for your color and comments and best of luck.

Alright, thank you.

Thank you again and have a question. Please press Star then one.

Next question comes from en Rouge lap the motion capital. Please go ahead.

Good afternoon, guys. Congratulations on a great quarter, you've done a really good job of explaining how the not too distant future has improved the outlook of the company and accelerated the.

Debt pay down schedule is the explicit goal to be debt free.

Yeah, I think it is.

I mean, I say that we we were net debt free in 2014, we went out and bought a company for roughly $300 million. So.

We know that if we deleverage our balance sheet.

That we can be more aggressive on opportunities that we see come in front of us right. So.

We focus every quarter.

Every every board call.

On reducing debt.

And.

Yeah, that's something very much that our board feels strongly about that's something that I feel strongly about we know that this company will last for one.

100 years to come as long as we do not get over Levered.

And so Oh that's.

And that's part of the reason why we have always.

And then longer.

Yeah, well hedged right, if you think about how it or where.

We're the company that has been well hedged through this process right and we've seen a lot of competitors go out of business because they weren't wellheads now.

Do I wish that we had nothing sold this year and we were pricing everything on the spot market absolutely what.

What I have slept very well [laughter].

Doing that no I'd I'd, probably be out of a job so.

We view it as a.

Yeah.

Our board on the 30 some percent of this company Ah I own a significant portion of this company.

We work very hard at it every day to figure out how we're going to generate positive cash flow.

<unk> debt.

And at the same point in time look at opportunities right. We we were able to transact this year on acquiring Hoosier Energy's interconnect.

We think that is a.

Very material asset that is not on our balance sheet or will be starting in 2023.

And it gives us a platform that as we get down the road and as we Delever our balance sheet again, we can't play we have the rights to plug into the grid.

Yeah, probably starting in June of 'twenty three right whenever.

The mayor and power plant goes dark.

And so you know for period of time thereafter, as when we were really focus all of them.

Our building out the solar and batteries that accompany that asset. We said on previous calls, we think that asset could support up to $3 billion of the best.

So there's plenty of money out there for.

Renewables.

Our goal is to did you use the cash flow from the coal business pay down debt. We think the tail of that cash flow is much longer than what the market gives us credit for and we have we can either return that cash to shareholders. Then at that point to share buybacks dividends or we can invest in.

In our in our solar platform, but we're in a battery platform. So.

We think we're unique in this regard.

There's not too many companies out there that have solar play.

And.

We will.

We will make those decisions when we get a little further down the road, but that's that's how it is shaping up and I think the thing that.

Yep.

I sleep better at night, because I know now that we have a good enough market to get us to where we're debt.

Debt free.

Our near debt free.

So because of that.

Very familiar with where it has helped me a lot.

Very familiar with the past is that this is the.

Is the history with the $300 million transaction with bank debt going to inform <unk>.

Future transactions of that type and are those being mapped into the current.

Valuation, which you guys eloquently pointed out and all of these calls is quite low I mean, youre at three times free cash flow for the last nine months.

You know, that's a pretty high bar for a negotiated transaction.

On the investment side.

<unk> wise.

Yeah, I think what you're saying is that we should buy in stock.

Well that what I'm hearing.

Well no I I I, just I know you can't talk specifics, but.

Color wise as far as the frustration level on the board for the current valuation of the stock itself I know I don't.

Think buying back stock with 100 million in bank debt is wise when you market values at 80 plus million.

Firmly.

In support of the pay down of debt I wondered whether that was the goal to go to zero.

And I I would say as a significant shareholder for on behalf of our customers wouldn't want to see that you know that replaced on a negotiated transaction when the valuation of the company is where it is.

And on the question basis, what is the level of frustration on our part of the board with the current valuation of the company or is there a discussion being had.

On a transaction to possibly take that out of the market trends.

I think that.

Our board frustration would not be the right word I guess Ah I think our board.

Deals that they own a large percentage of a company that has.

Our future of our free cash flow.

I think our number one focus has been to pay down debt with the board when I take out the existing shareholders.

Not something that we're talking about I'll put it that way at this time.

You know and.

I think that.

Again, the good news here is.

We have.

Yeah, hi, certainty being able to pay off the company.

It's still having an asset that's going to generate positive free cash flow.

We have an investment.

That.

We provide in the solar and battery business that we think provides an investing opportunity long into the future.

So as we get you know two years down the road, let's say, we will be evaluating what is the best use of our capital at that point in time.

Is it.

To buy in shares of the company is at.

To issue dividends to the shareholder is at two.

To invest in this platform or just be the developer and use other people's money for this so solar battery platform.

Or is it to buy something that's not even on our radar today.

I think that for now we're in the mode of.

Putting together a contract position that the insurers are security and cash flow for the next.

Two years.

And.

You know as we continue to Delever.

We'll start to look more aggressively at those options.

Still you know.

But I hope that answers your question.

It does thank you.

Thank you.

Again, if you have a question. Please press Star then one.

Our next question comes from Andrew Long Hallmark Investment Corp. Please go ahead.

Hello, Brent.

I'm returning to the question of.

Pricing, obviously, it's it's a little disappointing.

Our prices have gone down this year.

Obviously exacerbated by the fact that our costs have gone up.

Fortunately we got.

Rescued at least for the time being but I.

Forgiveness or the P. P P, but that can't be replicated.

And I guess, it's a little bit disappointing.

To see the.

The book of business for 2022.

Only a slightly higher price than what we're getting for 2021, but I understand a lot of that was booked before them.

The market heat it up.

But.

Really more disappointing to me is that.

If you look back at our earnings report for the second quarter. There was nothing booked for 'twenty 'twenty three.

And now we're reflecting.

3.8 million tons booked.

At 41, 30, well, that's that's a little better as them.

What we've been doing but but not much and its <unk>.

Certainly it doesn't reflect in my mind.

The hottest market.

Memory I'm in the gas business and we've had a heart market on our.

Our commodity prices more than doubled.

In that period of time.

My understanding is that coal prices.

I'm not reflect what's happening in the gas market and I'm not seeing it in.

In 2023, and I'm I'm I'm kind of baffled as to why that is.

Price increase for those recently booked.

Tonnage doesn't oh.

That reflects the proof.

Proof market very much.

Well 2023, what Youre seeing this report in 2023.

<unk> was not reported in 2020.

In the second quarter.

And we we had those tons booked it just wasn't reported we didn't go out that far.

And our sales.

But we do have sales out to.

Now as far as 2026, we have some tons.

And the market gets a little confused on that because.

Sometimes we have tons booked but unpriced.

So it gets a little tricky, sometimes and we get a lot of confusion over well you see these tons I see these prices and the prices change, but the tons it.

It didn't change so we have commitments to certain customers.

Out in the later years.

Two.

Yeah.

For tons that just aren't.

On price. So we added the year 2023 from a reporting perspective here in the third quarter.

But those are the legacy tons.

And so you'll see the pricing improvement on the unsold portion of that business.

So it was only 3.8.

Is that all of that's been booked for 'twenty to 'twenty three.

Correct, we are in discussions.

For 2023.

And we think we will have.

We think we we think it's very likely we would be able to put together a sales book.

For 2023 of of of 7 million tons.

So that's why we're trying to say any of that.

Oh.

We expect.

Both price improvement and margin improvement.

<unk> significantly in that in that 'twenty 'twenty three year.

You're just not going to see as much the 'twenty to 'twenty, two because we have contracts that.

Legacy contracts with customers Kenneth.

Flex up their tonnage.

Oh at the old prices, we have some carry over tons that will when it will come at from 2021 into 2022.

And then we have an open position.

Part of what goes into our math is is how fast will we be able to add people right, we'd be able to produce more tons. In 2021, then we bank.

Or will it take us longer to hire people, who won't be able to produce quite as much. So that's why we can't give you absolute certainty.

On what 2022.

Pricing is going to look like but at the end of the day I'm trying to communicate to every one that we see slight margin improvement in 2022.

We're really going to see volume improvement right. So we're going to run the same margins roughly maybe a little better at.

At higher volumes the 'twenty two 'twenty three is when we will see margin expansion at these higher volumes 24 again are our sales position is even open more so what will pricing be out there I just don't have great clarity the gas market.

It's strong and you're in the gas business. So.

You know if you guys are.

Ramp up lots of production that will drive prices down we think that the gas market.

It's tougher to get.

Capital than it was couple of years ago.

Theres some pipeline constraints out there we're seeing the public companies say that they want to return cash to shareholders they want to pay down debt.

So all of these things.

He has to believe that even though the price signals are higher for oil for go for gas.

For coal.

We're not seeing the supply response sponsors we've seen in the last years and we think that's in large part because.

All of these other additional ESG constraints from not being able to get capacity or capital.

Or having shareholders demand debt reduction demand share backs demand.

Dividends be paid rather than just expand expand expand so.

In the coal space like I said, we're not seeing a lot of expansion we're seeing.

All the old assets run as hard as they can run.

Will there be a couple of new competitors pop up I'm sure there'll be some but we know those are all very high cost mines.

We're going to have a hard time getting labor, they're gonna have a hard time getting equipment. So we just think the supply response.

It's got to be more muted than in past years, but that's not just for coal, we think that for gas and oil as well time will tell.

I hope so.

Yeah.

Thanks.

Thank you.

And if you have a question. Please press Star then one.

Our next question John Moran Rebote <unk> company. Please go ahead.

Yeah, I just I just wanted to follow up on that last question and clarify that so of the 3.8 million tonnes.

Booked in 2023 is anything above that unencumbered by any contract you have with existing customers.

Yeah.

In other words that would be subject to a price negotiation that's not it.

<unk> buy something in an existing contract.

No those will be.

Yes.

Oh, those will be new new sales.

But not subject to any pricing mechanism.

And then the existing contract.

No.

We'd be looking to sell another $3 2 million tons out there.

And do you and you have a couple of competitors showing cheat to your markets do you have any read R. R.

Visibility into.

What an unencumbered.

Tun.

Being sold in 2022 is right now are 23 of them that that's I guess, if you can see that there'd be no reason you could not disclose that as there are.

Well again, we don't.

We make it a habit of not getting into it.

Discussing prices, particularly when we are in active.

Negotiations with our.

Customers are trying to get a sense if you.

I don't want to know anything about your ongoing negotiations with your customers I'm. Just wondering if that's something you have visibility into you know somebody else's.

Contract or tonnage sold.

And in our Freeland freely negotiated transaction for 2022 or 2023 I'm just is there any sense of what that is.

Yeah, we havent, we havent gauged the market, we do not know what our competitors are negotiating.

Or what their terms are right I mean that.

The collusion.

But okay.

Yeah.

Yeah.

No definitely.

Alright, thank you.

One other question on your right on that renewable business in the mid 2023.

Access to the grid is that can you remind me or has it been disclosed is that is that a legacy interest that you own.

Or is that something that you recently acquired.

So we have a.

Joint venture development relationship with.

The company, we acquired it from.

It's not a legacy asset I mean.

Basically they had a coal fired power plant.

And the place where it plugs into the grid the interconnection to the grid.

We have obtained the book.

Obtained no physical asset we've obtained the right to.

When they.

Yeah.

Plug from the grid, we have the right to plug in.

And then when did you.

Acquire that right.

Well, we announced that transaction I believe June 2nd of this year, but that was a transaction.

Like I can't was there consideration for that or why did they select you or what was.

What was the consideration.

So there there's.

I can't get into the details of that transaction, but.

There there was no money paid upfront.

Is there anything that you can say about why they would like why why you had the edge there.

Why why why you were selected.

I I would prefer not to.

We.

We think there's we think we have.

Some insight on how to do that.

And how to help.

Our customer.

Dean value out of one of their legacy asset.

Think that potentially is repeatable.

So we don't really want to.

Give away the secret sauce on a on an earnings call. So.

No I understand I understand I was just trying to I'm just trying to understand if there's something proprietary there or it's.

Just I guess a project that you guys have been working on for a while and it came together I don't anyway.

Aye.

Hear you I just.

Alright.

So I appreciate the interest. Thank you. Thank you.

Yes.

Yeah, Yeah I have a question. Please press Star then one.

Next we have a follow up question from Duffy up here Castle, Mike. Please go ahead.

My question was answered congrats guys.

Alright. Thank you. Thank you destiny.

Thank you again, if you have a question. Please press Star then one.

At this time, we have no further questions I'll return the call back to Mr. Brent don't plan for final comments. Please go ahead.

Well, Hey, I I, thank everyone for their interest in <unk> and taking time to join us for the call today and.

Look forward to.

Talking to you again after the first of the year. Thank you very much.

I'll now concluded. Thank you for attending today's presentation you may now disconnect.