Q2 2022 Peabody Energy Corp Earnings Call
Please standby.
Welcome to the Peabody second quarter earnings call throughout todays recorded presentation, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions.
I will instruct everyone on how to participate and at this time I would now like turn the conference over to Alistair knows.
<unk> President of Investor Relations. Please go ahead.
Good morning, and thank you for joining Peabody's earnings call for the second quarter of 2022 with me today are president and CEO demographics, and CFO , Marc Urbach within the earnings release, you'll find our statement.
We're booking information as well as a reconciliation of non-GAAP financial measures.
Encourage you to consider the risk factors referenced there along with our public filings with the SEC.
I'll now turn the call over to Jim.
Thanks, Alex and good morning, everyone.
In the second quarter, our diversified assets delivered strong results.
Generating free cash flow of over $340 million and adjusted EBITDA of $578 million, our highest in more than a decade, despite ongoing weather and logistical challenges.
We continue to expect a strong second half with higher projected volumes compared to the first half of the year in all our segments and markets, although volatile supporting continued high prices.
During the quarter, we delivered increased sales volumes in every segment, except the CRB, capturing strong market prices, which resulted in higher margins.
With cash generated we continue to strengthen our balance sheet by advancing our debt reduction strategy with voluntary repurchases.
Bringing us closer to eliminating all senior secured debt.
Which will allow us greater financial flexibility in the future.
Before I expand on the quarter.
I would like to sincerely. Thank our global employees for their continued focus on working safely and efficiently.
Which has been truly remarkable given the adverse weather and logistics challenges we have been facing.
Without the dedication of our talented workforce.
We would not have had the outstanding second quarter results, we are reporting today.
Now turning to global coal met coal markets.
Across the globe, all coal price indices remain at elevated levels, representing a dynamic demand that continues to test the ability to supply in most of our market segments.
The outlook for all of our operating segments continues to be favorable with a constrained based serving a market. It is reallocating the scarce availability of coal.
Seaborne coal markets are currently facing disruption, resulting from the Russia, Ukraine conflict.
Coal supply in Australia continues to be challenged by weather and staff absenteeism, primarily as a result of continued COVID-19 impact and in the U S. Coal exports continue to be challenged by eastern rail logistics issues.
Seaborne thermal prices remained near record levels as around the globe coal fuel generation is called upon for energy security and reliability.
High natural gas prices are providing strong economic incentives for generators to maximize coal generation.
Evidence of this as the restart of available coal fuel generation in Europe .
The Russia, Ukraine conflict has also impacted the markets.
The cessation of coal imports from Russia by European countries is creating the need to source from alternative locations.
Including Australia, and the U S. Furthermore, reduce Russian gas pipeline for the Dear.
LNG terminal out of the U S are further challenging international gas supply.
Actions to rash and gas supply and preparation for the European winter.
Putting the recent 15% reduction of us EU agreement for their support coal fuel generation.
Compounding these issues, Australia supply continues to be challenged by historically high levels of rainfall.
With most recent supply interruptions associated with heavy July rate and in the U S rail.
<unk> performance is limiting export volume further constraining near term supply.
Overall global thermal coal markets remain robust with.
With pricing at historical record levels that is incentivizing high energy coal markets will provide the most value.
Within the seaborne metallurgical market anticipated still outbid for July to September has been trimmed in North Asia and Europe as a result of falling steel prices.
Hi distributor inventories.
There are signs of weakening end user demand due to following economic confidence in the face of increasing inflationary pressures globally.
As steelmakers introduce output production cuts, we have seen a weakening of incremental metallurgical coal demand.
Moving forward and offset some of this impact.
Steelmakers in Atlantic market switching away from Russian coal imports and seeking supply from other regions, such as Australia U S and Canada.
Particularly for PCI coals.
Robust thermal coal prices are above met coal prices, which is creating switching opportunities for European buyers, we can overcome technical barriers.
And this dynamic can be viewed as a positive for the met coal market balance in the coming months.
While energy charges and inflationary concerns in some markets present, a risk to near term industrial activity.
The underlying market fundamentals remain constructive.
As metallurgical coal supply remains static.
In the United States, the coal markets continue to be tight.
Supply remains constrained.
Experts Asian issues linger in the PRP and demand for coal has increased to meet summer electricity demand.
Overall electricity demand increased more than 4% year over year positively impacted by weather and economic activity.
Year to date electricity generation from thermal coal has declined year over year due to coal conservation by utilities to build coal stocks given concerns with rail performance.
U S natural gas prices remain elevated at levels not seen since 2008.
With weather driving market tightened and this is occurring even with higher supply as a result of increased production.
In an LNG terminal outage, keeping more gas in the domestic market.
Across the U S. We are seeing seeing growing caution regarding the pace of the energy transition.
Value of dispatch of <unk> capacity.
Evidence of this our announcements of coal plant retirements being delayed.
With multi utility exciting grid reliability concerns or delayed renewable projects.
This speaks to continued strong coal demand for U S coals.
Overall, we anticipate continued near term market volatility as coal demand fluctuate and supply remains constrained across the globe.
Our diversified platform is positioned to participate in each of these markets.
Optimizing results by managing the needs of our diversified customer base.
Now turning to the second quarter.
Our second quarter results were strong despite several external factors that our operation.
That are delaying plans to deliver increased production volumes across our platform.
We have included the impact of these factors and other adjustments in our updated second half guidance, which indicate lower results for the third quarter with improvements in the fourth quarter.
Yeah.
And our seaborne thermal segment the impact of February and Covid related staffing shortages continue to hinder our recovery plans to recapture full year projection production volume at Wilson Gelling and Rambo.
In early July a linear record flooding event with more than seven inches of rain intensified productivity challenges.
This event resulted in an interruption to our womble operations and rail services.
Further reducing production expectations as the minds recover from flooding.
We drew down inventory to deliver second quarter sales in line with guidance. However.
The update second half guidance to reflect lower sales volumes additional royalties and other costs in the third quarter as the minds recover from these events.
Our seaborne met segment is on track to deliver higher volumes and deliver on guidance as the year progresses.
The <unk> JV delivered higher volumes and had its first shipments were more of alfalfa.
At Metropolitan we completed a longwall move and are positioned for higher volumes in the second half.
At Shoal Creek, we transitioned to the J two longwall panel.
Following production challenges in the J, one panel and we projected <unk> to deliver higher volumes in the second half.
Outside of our operating segments.
Our 50% ownership share of middle amount benefitted from strong metallurgical market dynamics, delivering nearly 400000 attributable tons in the second quarter.
Production here was also impacted by severe rains and Covid absenteeism during the quarter.
Which is also expected to impact third quarter production.
And the priv further degradation of rail performance resulted in 2 million tons shipped less the nominated by customers in the first quarter.
And 4 million tonnes less in the second quarter.
Unfavorably impacted our costs as we continue to remove overburden at a higher production rate.
Which will benefit those operations in the future.
For 2022, although we have 90 million tons under customer commitments sales volumes will be dependent on rail performance.
Our other U S thermal mines continued to deliver strong results with increasing volumes expected in the second half.
Demand for our U S thermal products remains strong and we continue to place new business with both existing and new customers.
We continue to explore sales strategies that position Peabody to be the long term producer of choice.
Finding our customers long term supply security and capturing strike prices.
And the <unk> for 2023, we have approximately six to 8 million tons priced at $13 28.
With an average btu of 8600.
In our remaining uncommitted volumes of the higher quality 800 Btu coal.
While our other U S thermal segment at $16 6 million tons priced at $46.
80 per ton for.
For 2023 delivery.
In the quarter, we also issued our ESG report, which laid out the steps we have taken to strengthen our commitments and to reposition ourselves to better support the ESG targets of our stakeholders.
This includes our commitment to setting targets and developing programs to enhance our position as a champion of ESG practices.
Finally, we continue to advance our three renewable efforts to preserve the development of utility scale solar and battery storage and fixed track the previous coal mining land in Illinois and Indiana.
We have finalized our management team and commence site evaluations with our project developer Treaty Oak.
Our vision for the future is simple.
We want to continue to strengthen our position as a coal producer of choice.
We will do this by maintaining financial strength.
Reliably delivering a diversity of product to support our customers' needs.
Practicing operational excellence and champion ESG practices.
This will allow us to be resilient in all cycles and to grow with our stakeholders.
We are progressing this vision through multiple strategic initiatives.
And our met platform. In addition to completing development of Marvell, south to improve quality and extend life at the CMV.
We continue to assess development of 70 million tons of southern reserves at north pine yellow.
And in our seaborne thermal platform, we're extending the life of Womble underground with further longwall development.
In the U S. We've continued to implement sales strategies and plans to capture incremental volume and to give us flexibility in our mine plans to meet changing customer demands.
Some examples of these activities our expansion into new areas at our Wellbore complex in the Midwest and.
An additional mining unit that Francisco and great Gateway.
And most importantly, we remain focused on the financial strength of the balance sheet with further debt repayments.
I'll now turn things over to Mark to cover the financial details.
Thanks, Jim and good morning, everyone in the second quarter, we recorded net income attributable to common shareholders of $410 million or $2 54 per diluted share and adjusted EBITDA of $578 million nearly five times. The prior year result.
We generated free cash flow of $342 million ending the quarter with more cash than debt for the first time as a public company.
Second quarter revenue was $1 3 billion and 83% increase from the prior year as our diversified products continued to realize substantially higher prices with premium Australian thermal coal doing, particularly well recently achieving prices more than double premium hard coking coal.
These terrific prices resulted in higher sales price sensitive costs, and together with fuel cost and other inflationary pressures higher overburden removal in the IRB and the Shoal Creek transitioned to the J two longwall panel costs were higher than the prior year.
Turning now to the second quarter segment results.
Seaborne thermal generated $177 million of EBITDA, nearly double first quarter results due to higher realized prices and additional export sales, resulting in a 50% EBITDA margins the.
The segment exported $2 2 million tons 400000 higher than the first quarter.
The 143 per ton averaged realized export price was $24 higher than the first quarter.
As index linked prices were partially offset by fixed price sales and hedge tons.
Second quarter costs were impacted by higher sales price sensitive costs and fuel prices.
Included in the seaborne thermal segment is the Wilson you offline.
Which shipped three 3 million tons, including $1 5 million export tons.
<unk> realized an average sales price of $85 per ton, 70% higher than the prior quarter due to stronger international prices and a higher mix of export tons.
<unk> recorded $170 million of adjusted EBITDA for the quarter and had over $200 million of cash at June 30.
The seaborne met segment generated $300 million of EBITDA.
And then a $100 million higher than the first quarter as average realized prices of 331 per tonne compared favorably to cost of 145.
<unk> and 56% EBITDA margins.
The segment sold $1 6 million tons about 33% more than the prior quarter as higher volume from the CMS JV offset lower than expected production at Shoal Creek.
Cost per ton increased as a result of additional sales price sensitive cost Shoal creek transition costs and higher fuel and other commodity prices.
In the U S. Our thermal mines delivered $60 million of EBITDA.
We shipped 18 5 million tonnes about 2 million tonnes less in the first quarter as rail service continued to hamper shipments to customers with only 82% of customer nominations met in the quarter.
Costs increased compared to the first quarter attributable to additional overburden removal in the absence of available rail as well as higher fuel prices, partially offset by lower contractor costs.
The higher overburden removal relative to tons shift has driven up first half costs and will start to benefit from that as we shift some of the uncovered coal at the customers in the second half of this year.
The other U S thermal mines shipped $4 4 million tons as the Midwest mines increased sales of 400000 tons compared to the first quarter.
The segment reported higher EBITDA margins of 28%.
Cost increased due to higher fuel and other commodity costs, partially offset by one time first quarter costs.
Now a quick look at financing items at June 30, we had $1 1 billion of cash and cash equivalents.
$94 million more than total debt.
During the second quarter, we retired another $51 million of secured debt.
Subsequent to June 30, we retired an additional $116 million, including $94 million of Wilson Young senior notes pursuant to an offer that was upsized from the original $50 million offer bringing year to date debt repayments to $290 million.
Immediately upon closing the Wilson young senior notes the offer we launched a reciprocal offered to the Wilson young term loan holders for an additional $44 million, which we expect to close in a little less than a month.
Now, let's turn to our full year outlook.
As Jim mentioned, we have updated second half guidance to account for weather impacts on our Australian mine plans higher sales price sensitive costs and higher fuel and other commodity prices.
The seaborne thermal segment to account for the lost productivity from severe range, we lowered full year expectations by 1% to $1 3 million tons, we increased expected costs by $8 per ton to reflect higher sales price sensitive costs fuel prices and lower production.
We expect strong second half results from the segment based on $2 3 million export tons priced on average at 140 and about $2 4 million unpriced tons, including 800000 tons, which are expected to price at Newcastle benchmark levels, and $1 6 million tonnes expected to price in line with API.
Coal due to current coal quality and market conditions.
Seaborne metallurgical volume is expected to be a bit higher than previous guidance and we narrowed the range by increasing the lower end by 300000 tons.
Higher second half volumes are anticipated due to higher production at the metropolitan more male cell and Shoal Creek mines.
With essentially all second half tons unpriced. The current product mix is expected to achieve 75% to 80% of the premium hard coking coal benchmark.
Cost per ton for the full year have increased $15, primarily as a result of the recently announced highly progressive Queensland royalty regime, which took effect July one and.
And higher fuel prices.
And the <unk>, we have experienced increasingly poor rail service.
We shipped 89% of customer nominations in the first quarter.
Only 82% in the second quarter and July month to date is down to 77%.
Based on current rail performance, we've lowered full year sales volume by 5% to 8 million tons.
<unk> costs for the full year have been raised about $1 25, as a result of the lower expected volume higher fuel costs and general inflationary pressures.
Other U S. Thermal volume was raised 500000 tonnes to 18, five or $19 5 million tonnes, while costs were increased $4 to reflect higher fuel maintenance and other costs to achieve higher volumes.
Essentially all remaining U S thermal tons are priced and committed.
Our sales continue to be dependent on rail availability.
With these updates we expect a second half with strong margins and cash flows.
Lastly, we will maintain our disciplined approach to capital allocation using free cash flow to continue repaying secured debt and cash collateralized reclamation obligations.
I would now like to turn the call over for questions operator.
Thank you.
I would like to ask a question today. Please take note by pressing star one on your telephone keypad.
I think a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment again. Please press star one to ask a question it will pause.
Now I'll turn just a moment hello, everyone and opportunities signal for questions.
And we'll take our first question from Lucas pipes B Riley Securities.
Thank you so much good morning, everyone.
Hi, I wanted to first ask a bit about <unk>.
<unk> yellow and specifically.
There was the new royalty regime announced here a month ago or so for Queensland.
And if I kind of think back to prior quarters and questions around capital returns.
And yet it.
It sounded like it factored into this so with the changes.
On the royalty side.
Is this organic projects, maybe moving further down the priority list and speedier and greater capital returns or maybe even more attractive than they already work. Thank you very much for your perspective.
Okay.
Yes, so north Daniella, you know you talked about the new royalty regime and in Queensland in just a couple quick comments on that first Lucas.
<unk>.
The Metropolitan mine is not affected by that because it's not in queens and effects of the <unk> JV and middle mile and of course north of in yellow.
When brought back online so north can yellow test is still a.
Attractive option.
For organic growth, probably our best organic growth opportunity that we have in the company.
And we're still doing work on the surface and a lot of engineering studies and evaluation with that project, which we have been doing.
Throughout the year, so it's still a very high priority for us and a list of all of our projects that we're looking at us as being financially attractive.
Okay. Okay. That's that's that's helpful.
Yeah.
Yes.
I'll switch topics for now.
So 2023 is obviously not far away anymore.
Okay.
This is an understatement lots of movement on the.
On the pricing both internationally, but also domestic.
You pointed to increase 2023.
Commitments.
Can you give us an update where then of how much and at what price you various products art are committed and priced for 2023.
What's what's left to sell in that would really allow us to.
Properly calibrate.
The earnings power not just.
Obviously, we have two coming quarters here, but into into next year, given given the very significant pricing. Thank.
Thank you.
Yeah.
Yes Luke.
Yes.
As far as what we have sold as I've said in my comments in the PRP, We've got the 68 million tons sold at the <unk>.
$13 28.
And that's in the 8600 Btu, we still have.
All of our unsold PRP.
In 2023 of the 8800 quality coal.
And in our other.
Thermal coal in the U S.
We've got $16 6 million tons sold at $46.
And 86% 80, a ton and so we haven't given guidance yet as to our tonnages.
For next year. So we're not prepared to do that at this time, but that's what we have sold there I will say that in the.
Metallurgical markets.
As far as interest for next year, we are getting interest from our customers for commitments now to sell metallurgical coal next year in greater quantities.
We have sold to them this year.
So.
Of course, it will probably come at index index prices and doing those sales, but it is an interesting dynamic since youre asking about 2023 that in.
In the metallurgical markets were getting customer interest to make commitments now for significantly increased tonnage amount than what we sold to them. This year.
That's that's out.
Very good to hear and I'll ask one final question.
Before turning it over the.
Yes.
International seaborne thermal coal markets extremely robust where premium over met coal.
You are you selling into that thermal coal market already and with that also factor into what you just mentioned on 2023 met coal commitments.
Lucas, but when you talk about selling into those markets that you're talking about metallurgical coal being slightly correct. Its correct correct yes.
Brian lets take your questions yes. Thank you.
It's about switching medical volumes into the seaborne thermal coal market.
Yes.
Started looking at having that occurring into the <unk>.
Into the third quarter.
And some of those sales mainly from our Shoal Creek mine.
So.
As far as this year, what I referred to for next year was strictly metallurgical coal.
And interest for metallurgical coal buyers to be locking down tons for next year.
Okay. Okay. Okay.
Okay.
Alright, well I appreciate it.
Best of luck I'll jump back in queue for now.
Thank you next we'll move on to Nathan Marine Benchmark company.
Good morning, everyone. Thanks for taking my questions.
I guess I'll start there was a headline of this week.
Japanese annual contract settling around $375 a metric ton.
Great to get your thoughts around that.
Are you cooperating.
That value and if your updated seaborne thermal segment price guidance. Thanks.
Okay.
Obviously thats not the traditional we haven't had the traditional J ERP settlement.
Occurring this year, so what we've been doing is bilateral settlement.
Negotiations are what were undertaking and so the results of anything that we have settled Nate is in the guidance already there is a sensitivity to talking about prices on our sites and the ERP isn't settled because we do have.
Ongoing.
Ongoing negotiations right now in these bilateral agreement so I.
I guess I'd like to leave it as a.
The prices that we have settled or in the guidance going forward and we're still in active negotiations on another ton. So I prefer not to comment on prices. While we are in active negotiations.
Okay.
That's fair.
Maybe moving on to our Q2.
Lucas's question.
Talk about crossover met and thermal markets.
Given kind of the unprecedented premium thermal prices.
Our display ever met in today's market.
What do you think about differently, what kind of opportunity do you think there could be there maybe not only for Peabody, but uneven globally, what kind of barriers to entry do you guys see.
Making that topic. Thank you.
Well.
Maybe I'll attempt to answer that and please if I don't answer your question just a follow up so I make sure I do.
When you say barriers to entry the number one thing that I think you look at is it technical is the quality of the metallurgical coal the volatile matter the beta used the ash and sulfur.
What type of thermal markets can it go too so not all metallurgical coals.
Move move into thermal markets. So I'd say, that's the number one thing that you look at our cost obviously, but then you get to the KOL actually be consumed and boilers and so that's the issue I think you mentioned something and barriers to entry and whether it's you know.
Thermal coal for metallurgical coal.
The barriers to entry for incremental production are new production I should say is pretty high.
So.
There isn't any big more metallurgical coal projects coming online and so is that coal goes into the thermal markets.
Tons that Ken.
Automatically makes the supply side less in the metallurgical markets, which at some time, we would hope would result in a quicker price rebound into those markets. So.
High barriers to entry for new supply and the switching is very very much dependent on the quality of the coal.
Maybe one more thing.
Yes, just wanted to add you know, we're talking about switching from mats into thermal and as Jim mentioned, there is a lot of technical barriers for that to happen. So on the margin. There is sometimes they can go in there but.
I don't want it lost in the discussion it's a great time for peabody's diversified portfolio in the eight to 9 million tons of seaborne thermal that we are selling at these great prices north of $400 per ton on a newcastle level.
Yeah, and then Mark I agree absolutely that was kind of the Genesis of my my initial question around up to 375 number that was floated out there this week.
Our record results if that comes to fruition.
Jimmy I appreciate those thoughts.
I guess I was also kind of thinking.
Tonnage wise and maybe whats out there or are we going to see restrictions in the near term driven.
Maybe some comments there was already contracted on the met side. So it could not participate in the thermal market.
Or or things like that.
Yes.
Just speak for our company.
With if we'd have commitments under contract we're going to honor those commitments. So we just can't take all of our metallurgical coal and then just switching over to the thermal market. So really youre talking about our uncommitted tons.
Or incremental tonnes that we can bring.
Bringing to market.
And right now again Thats, mainly our Shoal Creek mine were looking some at our Australian mines Metropolitan Mine is one of them for some other sources of that ton. So I don't have a hard number for you at the moment Natus, how many tons we're looking at.
We're still evaluating that.
Yes.
If we could just flip the KOL in the thermal market that'd be great, but we got to find specific markets that can handle our coal quality and so it takes a little bit of time to do that.
Totally understand.
Understand very very helpful. Jim and then.
Maybe just one final thing I think you guys mentioned about 264000 tons of hedged thermal coal.
$4 sold during the quarter. It looks like you mentioned, maybe a similar outflow rich you anticipated could we just get an update on how many tons are left there and when you expect those to roll offs I appreciate it.
Yes.
We now have less than a million metric tons. After the roll off of those Q2 hedges.
Will roll off over the next 12 months, finishing in the first half of next year.
I would like to roll off a little bit.
Heavier in the second the second half of that but maybe 425000 tons over the next half year in the second half of 'twenty, two and about 5% to 550000 tons in the first half of 'twenty three.
Okay. So $4 25 over the second half on 500.
Slide 50 in the second first half of next year and that's right.
Great. Thank you for the details Mark I'll leave it there and best of luck guys in second half.
Thanks, Nate Thank you Nate.
Thank you and next we'll move on to David Gagliano with BMO capital markets.
Great Hi, Thanks for taking my questions.
Hi.
A series of questions are related actually to most of the questions have already been asked but just a little more detail on some of these some of that's obviously you've covered.
First bucket of capital allocation I was wondering if you could speak a little bit too.
If Peabody has a total debt reduction targets, specifically, if you could quantify that.
That's my first question.
Yes, good morning, David.
On capital allocation as we said.
Everything we do is with a keen eye to increase shareholder value.
And we've said for a while now that the repayment of our senior secured debt is the pathway to doing that is the first step since the start of 2021, we repaid more than $625 million of debt.
We expect to continue that course, and so we've eliminated the secured debt.
We have about $600 million of that remaining and once that's repaid.
We will then look to address the unfunded $320 million LC facility that matures in 2020 for that facility is used right now for noncash collateral for the reclamation liabilities.
That needs to be replaced as we continue to fund long term reclamation liabilities.
Okay.
And then on the North Green yellow a restart I know its still being evaluated is there a range.
Historically.
There was there was a range and it was fairly wide is there a range that you can give us in terms of potential capital expenditures associated with the.
Options Youre looking at it north of northern yellow.
Hey, Dave we haven't.
We haven't settled on those numbers yet internally is still part of our evaluation were looking.
At the mine plan, so when we're ready to give that to you David we will but it'd be premature for me to do that at this moment.
Okay, and then on the <unk>.
Shareholder return side.
Any update on <unk>.
Negotiations with surety bond holders regarding restrictions on buybacks and dividends.
Yes, just as a reminder, both both our debt documents in the surety agreement prohibit shareholder returns at this point.
We need to address the secured debt in the LC facility, which I spoke about earlier that will position us to have further discussions with the surety providers and.
And we're looking really to do to reach our long term plan to fully fund our final reclamation obligations.
Okay. Thanks, now switching gears over to the.
Market commentary and your NPV batteries position here first of all on the thermal domestic thermal thank you very much for the price for 2023, it's helpful.
For the PRT volumes that are committed and priced.
Of that $68 million I think 7 million were priced in the second quarter and obviously those the overall prices is an average of all the prices that we've seen.
As the contracts were layered in my question is what was the price for the 7 million tons of Pier B coal that was committed in the second quarter for 2023 deliveries.
Steve will have to.
Maybe that the kits that went up with you later I don't have that type of number with me.
Specific number.
You are asking is is it sure.
He doesn't have to be specific is there is it.
I'm trying to get at what the current market is for 2023 contracts relative to that average that 30%, 25% can you give us a framework as to relatively speaking.
How high it is relative to $3 25, Youre guessing is higher.
Yes again.
Ill use the same comment I use.
With with some of the other calls we are still in negotiations for the for other coals that we have there and some of the coal we saw was eight 800 and.
The call that we have left to sell is the 8800 so.
Since we're still in negotiations, Dave I'm, just not going to comment on those prices right now.
Okay.
No problem and then and then just in terms of the approach to the volumes out of the powder River basin for 2023.
Assuming rails fix themselves what does near term maximum quarterly volume if everything goes well out of the PRP for Peabody.
Part of that question and secondly.
It's Peabody evaluating plans to increase volumes in the <unk> in 2023.
And would it be body spent capital to expand capacity in the <unk>.
That's it from me on that piece.
Yeah, David listen we had to take our guidance down the TRP given the rail service we were our top end of our old guidance was 95 million tons.
Certainly the demand is there rail has been the confining factor to date.
Assuming that rail is fixed and we are in regular conversations with with rail providers and the unexpected that should be fixed here as we go through the second half of this year.
Can be back to full service levels next year.
Would expect that we would be at those levels.
That we had in our original guidance certainly demand continues to be strong with all the pressures on natural gas prices thermal is certainly attractive here. So.
Strong demand.
Would say that without giving any guidance for 'twenty threes, we're not prepared to do so I would look at is consistent with that within our original guidance for this year.
Okay is there capital expenditures for incremental capacity additions in the <unk> under evaluation or their capital expenditures under evaluation at this point.
Yes.
Look we did increase those tonnages are planned tonnage this year from the prior year certainly did that in the Midwest as well.
There is there is.
Certainly always under consideration, how we can increase the tonnage around the around the margins.
At this point, it's mostly equipment.
Okay, and then sorry my last one.
If the world stays where it is obviously netback pricing is more attractive than the excellent market I think even out of the P. R. B.
I was wondering if you just frame from a realistic perspective, the order of magnitude of.
Peabody's U S thermal that could shift into the global export markets in 2023.
Sorry, Dave I want to make sure I understood. Your question was the last part of it was how much of the U S met.
Could shift into the thermal markets was the second question, sorry, if I said, Matt I apologize what I was asking was how much.
Realistically would Peabody export out of the U S on the thermal side of the incremental in 2023 versus current.
Given where netback prices are now.
Yes, well in the.
There's a lot of assumptions there you mentioned the rail and our first commitment is to our existing contracts and our long term customers.
To us at the moment every ton that you shift to export is when you take away from our domestic customers that youre not shipping too. So we wanted to make sure that we are loyal and serving the needs of our base customers before we start shipping coal.
Out of the country for commitments that we have already.
The second part of that becomes is their port capacity in as their rail capacity available and right now there isn't incremental rail capacity available in the ports are.
And the same situations so.
It's something that we would that we take a look at Dave but I.
Any substantial tons I guess is what you're getting at I don't see that occurring for us even though we take a look at it but I don't see that being an issue.
Something that we'd be doing with our pier b for next year.
Okay. That's helpful. Thanks very much.
Thank you.
And there are no further question I would like to turn the conference back over to Mr. Jim Greg for any additional or closing remarks.
Yes.
For everybody for joining us today and.
And again as I said at the beginning I'd, especially like to thank our employees for remaining focused on safety and continuing to execute on our various initiatives.
And also thinking our customers investors insurance providers and our vendors for your continued support.
Operator that concludes our call.
Thank you and that does conclude today's teleconference. We do appreciate your participation you may now disconnect.
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Yes.
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Yes.
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