Q2 2022 Alpha Metallurgical Resources Inc Earnings Call
Greetings and welcome to the Alpha Metallurgical Resources' second quarter 2022 results conference call. At this time all participants are on a listen only mode. A question and answer session will follow the formal presentation. Please note. This conference is being recorded.
Now I'll turn the conference over to your host Emily O'quinn Senior Vice President of corporate Communications you may begin.
Thank you, Rob and good morning, everyone.
Before we get started let me remind you that during our prepared remarks, our comments regarding the patent business and financial performance contain forward looking statements.
Actual results may differ materially from that.
For more information regarding forward looking statements some of the factors that can affect them. Please refer to the company's second quarter 2020 earnings release and the associated SEC filing.
Please also see those documents for information about our use of non-GAAP measures and their reconciliation to GAAP.
Participating on the call today.
Karen.
Thursday.
And president and Chief Financial Officer and yet.
Also participating on the call are Jason Whitehead, our Chief operating officer, and Dan Horn, our Chief commercial officer.
With that I'll turn the call over to David.
Thanks, Dan good.
Good morning, everyone and thank you for joining.
This over six years ago I joined <unk> during those years, we have certainly experienced our share of obstacles and hurdles.
On many occasions, we had our share of people questioning whether apple was spot deals.
So before you today as proud as ever on the accomplishments of the team.
<unk>.
Humbled by the opportunity given the six years that was part of that team.
Because it does seem to be stronger we achieve more in the coming years during my tenure.
Yeah.
We have always been transparent or goes about.
We do that a heavy debt load, thanks, navigating mark or difficult.
Essential to invest in our people and our assets to rollout.
And lastly, our shareholder base is very loyal net loyalty you have to be rewarded.
Over the past quarters, we've clearly laid out the plans and actions we needed to take in order to accomplish those goals that Ian let me share the great news in the second quarter.
This is our first earnings call as fully paying off the remaining term loan balance early June completing our long term debt elimination.
As you know deleveraging has been a top priority for us.
Just over a year ago, A&D laid out a plan to reduce and possibly eliminate our debt by 2023.
This layer laser focused approach to our financial management as.
As well as actions taken to shore up all aspects of our balance sheet enabled us timeframe be realized second quarter, well ahead of anyone's expectations.
Couldn't be prouder of A&D and the entire executive team.
Their discipline and seeing this through to completion.
It's not only transformed our balance sheet.
But I believe it marked the start of a new chapter of Theres more flexible resilient organization that is better able to withstand the inevitable.
He is.
Strategic and tactical decisions of the tea, along with strong markets. We experienced this year allowed us suppose backpack record performance for the second quarter generating adjusted EBITDA of nearly $700 million.
The decision in leadership with James over the past three years of bringing on new more efficient mines as well right. So our preparation and transportation infrastructure is reflected in this record EBITDA.
Our shareholders have been below 40, both our short and long term spreads over these past years.
Our board's decision in May.
<unk>, our share repurchase program to $600 million reflected our appreciation for that long.
We have made significant progress in buying back our shares with approximately $268 million spent so far one 9 million shares.
Representing a roughly 10% of our issues now standing shares with the programs again.
In our previous earnings call when I spoke to you about our dedication eliminating debt. When we began the conversation of our plan for the long term growth and sustainability about.
Hi, Dan staying to provide us with a marketing plan that would complement our vast and diverse resource base.
<unk> see with aligning our safe production with our vision of those future market demand, while maintaining a competitive cost structure.
As always both Dan and Jason generated not only a roadmap to bridge our current reduction in customer base with our vision of what will be 15 years now.
They've already begun executing on the next chapter of what we fully expect long successful like route.
In order to fully execute on the strategic goals, we need to be staffed and running well administrator.
And the scenes effort, but what youre seeing well stay focused on our safety and environmental stewardship efforts, while maintaining the critical support framework of the niche areas like legal human resources and land.
Additionally, General Counsel was released all these important efforts.
We have been engaged in succession planning foodservice companies equipped with leadership it needs for the near term that we are continually cultivating a deep bench of talent in the organization to staff up as needed in the future.
After all.
Well, Brian company as large as larger than a single person.
It says leverage the expertise knowledge of the team to advance the company's goals.
And believe this strategy exactly how help us achieve so much in the recent history.
Over these past years I've been fortunate to be surrounded by the best management team in the industry.
<unk> navigated some of the most difficult financial.
Asian and marketing hurdles.
Could easily led the values such.
Instead, we're courageous decision, making and flawless execution, we reported another record quarter now as a debt free company with robust capital return program.
I believe the future is bright browser and that confidence is informed by a decision to make important personal analysis.
I've been thinking about retirement for some time.
Basically knowing that we built a strong and experienced team that can lead alpha for decades.
So I decided that later this year is the right time and all of the C O ways to India.
The board of directors met last week, and poorly and unanimously appointed Andy to serve as CEO beginning on January one 2023.
He will join the board as a director at that time.
As of December 31, 2022, I will transition to the role of executive Chairman of the board.
Which allows me to step away from day to day management can take on a higher level oversight.
Andy and I have been working closely over the last few years, taking steps to prepare for a seamless transition.
Over this time he has taken an increasingly broader social responsibility I have complete confidence in ability to step into the CEO role at the end of the year.
Andy is intelligent.
Experienced highly qualified he shares my vision for continued split up on the outlook.
The industry leader that we are I know they'll serve out extremely well.
Yeah.
I want to thank my board of directors, and our shareholders or the dedicated unwavering support during my tenure as CEO of Alpha.
With that I will now turn the call over to Andy to share. Some additional details about the trades. They can plan for his current role and his vision for the company.
Thanks, Dave and good morning, everyone before I get started.
Let's take a moment to acknowledge the incredible work that David has done as our CEO .
I have a front row seat to the positive impact he created and I can attest to the critical role he's played.
We achieved a win never fail to give the team credit and we face serious challenges he never will seize the opportunity set backs is even greater.
The Sanger Graham will forever be on this company that we cannot thank them enough for what you saw.
As he mentioned today's announcements are a window into what <unk> will look like.
After paying off our debt significantly reducing our legacy liabilities. The company is entering an exciting new space.
It'll be different without the weight of our previous debt load, but I believe that the discipline and resilience leadership vision that brought us to this point on the same things that will propel us into an even more successful future.
This team has accomplished over the past three years nothing short of incredible and that is due primarily to two things the strategic vision of foundation that they've created and the Unparallel efforts of the World class <unk>.
This new phase, we will continue to honor that foundation.
In addition to the CEO transition, we have announced today all I am pleased to report that the board has selected Todd months.
Take over the duties as CFO as of Tomorrow.
Todd served the company as SVP and controller since 2016 and prior to that in a number of high level loads and our tax and accounting departments after getting a sars fast startup cross boarder housekeepers.
The board has named Todd to the role of Executive Vice President and Chief Financial Officer effective as of August nine.
Have great confidence in possibility to sell in this new role.
We look forward to bring him into the earnings call process next quarter.
Additionally, and very importantly, I want to highlight one more change that'll happen at year end.
The board has appointed Jason Whitehead surface of Alpha's President in addition to his current position as Chief operating Officer effective January one 2023.
We all know what an integral part of this organization that Jason is.
In my opinion is the best operator in this and I'm Super excited for him to take all of those broader leadership role.
Before I turn to the quarter's results.
I want to Echo David's comments about the strength of this team.
Alcohol will retain the benefit of Davis wisdom and guidance as executive chairman of the board.
I think Jason Roger and Dan are the best in this industry.
And class.
Alpha is very lucky to have them all in.
I am truly humbled by the opportunity to lead this phenomenal company I couldn't be prouder to be a part of it.
Turning now to look at our second quarter results I'm pleased to say that we achieved yet another record in back to back quarters.
Excuse me back to back to back quarters, that's three in a row.
$695 million of debt.
Q2 was 38% higher than the first quarter's adjusted EBITDA was $504 million.
In terms of volumes, we sold four 3 million tons in second quarter with $4 1 million tons of that coming from on that segment.
As we mentioned in the press release thermal market volatility has created some opportunities for crossover Medpage, we sold into the thermal market.
We have taken advantage of this opportunity and slightly increased our shipment tons for the thermal byproducts piece of the met segment as a result.
As expected realizations on export potash continued to improve quarter over quarter with an average of $337 38 per tonne realized an export business for second quarter compared with $278 one.
Export tons priced on the Australian indices continued to lead our quarter realizations of $350 coal price against the Atlantic indices and other promising mechanisms.
You say realized $321 per ton.
Oh, we're weighted average realizations for our pure met.
Production as a whole $304 per ton for Q2, an increase of 20% over the prior quarter's $254 per ton.
Realizations in the all other category was $61.41 for the quarter up in comparison with $57 31.
With indices haven't caught up off of their highs earlier in the year.
We expect to see that downward pressure flowing through our realizations over the next couple of quarters.
However, even with the significant drop from recent record highs current pricing levels are still very strong relative to historic norms.
Our second quarter results reflect the elevated pricing environment from first half of this year.
As a result, our royalties and circumstances continue to drop.
That segment cost of sales.
In the second quarter increased to $111 36.
Up from first quarter levels of $103 60 Whatsapp.
Cost of coal sales in the all other category remained flat against the prior period.
Just under $50 in second quarter.
SG&A excluding noncash.
And non recurring items increased to $16 $8 million, two as compared to $14 million.
Q1.
As a result of increased incentive compensation.
Outperformance against budgeted metrics, we're increasing our SG&A guidance from greater range of $55 million to $59 million. This is up from our prior range of $54 million.
Q2, Capex was $41 $9 million up from $28 1 million in the prior quarter.
Going to the balance sheet and cash flows.
Goes out in the second quarter was $161 $7 million in unrestricted cash and $91 million of unused availability under our ABL.
Total liquidity increased again quarter over quarter to a level of 250 to one $8 million at the end of June .
This amount is also net of our fall term lumpy, which was $94 million on June three and eliminated our remaining balance and $176 million in share repurchases during the quarter.
Cash provided by operating activities increased $336 million or one $466 million in the second quarter.
As of June 30, our ABL has no borrowings 60, just under $64 million or letters of credit outstanding significant reduction of one $121 million of.
Lcs outstanding.
We're making additional progress in our committed across business for 2022, 69% of all of that tonnage in the met segment committed and priced at the midpoint of guidance and.
At an average price of $260 assisting us and another.
Another 29% of our 2022.
One is committed but not yet price.
Thermal byproduct portion of the met segment, it's fully committed and priced even against our increased guidance range at an average price of $89 91.
And we're fully committed in price for 'twenty two in our all other category with an average price of $83 38.
Board and management team has been focused on capital allocation strategy the value for our many stakeholders and ensure that we were making the best use of our resources.
To this end, we've evaluated potential transactions in the M&A space.
After careful consideration we concluded that our best course of action for the continued development of our own assets and to devote resources to our share repurchase program.
Since our last earnings call, we've made significant progress in buying back shares using a programmatic approach that allows for opportunistic purchasing and maximizes the efficiency of our dollars.
As a reminder, the board authorizations for $600 million program.
As of August ship, you spent a total of $268 million or nearly half of the authorization require roughly one 9 million shares of common stock at a volume weighted average price of approximately $140 per share.
As of today, we have approximately $17, one 7 million shares outstanding.
Clearly the impact of approximately 220000 exercise for us.
With that I will turn the call over to Jason for some details on our operational performance.
Thanks, Andy and good morning, everyone I'll.
I'll start by congratulating our teams on another outstanding quarter. In addition to our everyday focus on safe production. The quarter was also positive in terms of advancing the ball on several of our special projects.
Why don't Wanna highlighted for Glen Alum mid Vol mine that will feed into our more preparation plant.
Our teams have worked incredibly hard and against the number of supply chain obstacles to keep this month's development on track.
And I'm pleased to report that the Glen Allemande took its first cuts of coal in June .
We're excited to bring this mine into our portfolio and we continue making progress on the plant upgrades and other various capex projects, we announced late last year.
Additionally, we closed on the purchase of the Crown Hill dock at the end of June .
This is a river barge loading facility in Canola County, West, Virginia, and we believe this property will provide some future optionality for logistics and transportation of our coals.
We continue to see volatility in the global coal markets with thermal coal, having had an especially volatile span in recent months.
This is due to several geopolitical factors, including the Russian invasion them.
Crane and its effect on the European energy landscape.
Thermal coal when diocese of jump higher than even the highest quality met coals.
Inverting what has historically been a predictable pricing hierarchy.
As a result.
How volatile metallurgical coals are finding their way in the thermal coal markets and Alpha has taken advantage of some opportunities in this regard.
We have have all be commitments for both Q3 and Q4 for servicing thermal markets and we continue to mine reclamation on our Black Castle surface mine, where we're producing incremental thermal production, while cleaning up legacy a CRO and the balance sheet.
Similar to this we will resume production in the fourth quarter of this year on two permits on our Republic surface mine.
These permits will produce nearly half a million tons of high btu thermal coal through 2023 and position the permits for final grading and seeding that will play take place near the end of next year.
The radically changing economics in the thermal market have also increased the reserve life at our slab can't be months.
Formerly plan to idle this year more resource tons have been identified and mine plans are being developed.
Our last pure play thermal mine is now expected to operate into the first quarter of next year.
As a result, we've increased our guidance for the incidental thermal byproduct of the met segment by 200000 tons on either end of the range.
We moved from our previous guidance range of between 800000 to $1 2 million tonnes to a new range of 1 million to $1 4 million tonnes.
This also slightly increases our total shipment guidance.
215, 6% to $17 2 million tons for 2022.
Before I wrap up my remarks, I want to again highlight the collective efforts of our employees that have fueled alpha's back to back to back record quarters.
Without their daily focus on safety environmental compliance.
And efficient reliable production, we wouldn't be able to post financial results like we've announced today.
Our employees are critically important to our success and therefore, we've continued to invest in our workforce and incentivize strong performance toward our safety environmental and production goals.
Since the beginning of 2021 and on an annualized basis, we have invested an additional $120 million and our employees in the form of wage increases expanded benefits offerings and incentive bonuses.
We believe alpha as the employer of choice and we strive to continually maintain that distinction by sharing the company's financial success with our employees when possible.
I will now hand, the call over to Dan for some additional information on the markets and our sales efforts.
Thanks, Jason and good morning, everyone.
As Jason mentioned coal markets continue to shift in response to a variety of factors.
Overall weakening of the global economy.
The ongoing war between Russia and Ukraine.
<unk> concerns and recession fears of all influenced the pricing.
All across the globe.
Great irregularities, resulting from the Russian invasion created inefficiencies in trade flows.
As well as a new balance typical pricing hierarchy.
Yes.
On the metallurgical side of things concerns regarding global steel demand has caused markets softened goose bumps with indices were trading significantly from their record highs really.
While current levels are still considered strong relative to historical averages they represent a meaningful drop from where they started earlier.
The Australian premium low vol index dropped $480 per metric ton on April three.
$302 per metric ton at the end of the second quarter.
After the quarter with E L D.
These continue to draw further down to roughly $203 a metric ton in recent days.
As a comparison the U S East Coast Global Index declined from $485 per metric ton. It started the quarter with $317 50 per metric ton at the end of June and is now down to around $232 per metric ton.
Use those high volume next quarter and $480 per metric ton declined to $330 per metric ton at quarter close.
Came down now to roughly $245 per metric ton.
Correspondingly the east coast side won't be a desktop $455 per metric ton down to $340 over the course of the second quarter and is down now.
With revolvers for Patrick.
We monitor several economic indicators I understand the health of the steel industry.
It's one of those being the world Steel Association's crude steel production.
Before he does reports June global crude steel production decreased about 6% as compared to the year ago period with all regions represented now supposed to be.
Client against their June 2021.
Among office key markets European Media is June 20, when two crude steel production representative decline represents a decline.
12% or two year ago levels.
South American production was down about 5% since June 2021.
Here in North American production decreased by two 4%.
Periods of that year.
Moving over to the thermal markets towards creating energy prices in Europe , which has caused certain formal calls to come.
And at a higher price premium poking holes in some workers for challenging pre pandemic whole market norms.
Looking at the seaborne market, where this is most pronounced the API two that started in the second quarter at $260 per metric ton on April 1st Rose to $307 35 per metric ton as up order closed on June 30.
It's come back down to hover around $278 per metric ton.
As a comparison point central App prices and 12500 Btu fall on <unk>, it's been around $190 per short ton.
Despite slowing down in steel production, we are receiving consistent interest in our products and as Jason said, we can do to capitalize on opportunities to sell some incremental tonnage into the smaller markets to take advantage of the current price environment.
Well metallurgical coal pricing has significantly declined from all time highs we saw earlier this year.
Those levels are still quite strong relative to slow I am optimistic.
This is about probably domestic season negotiations.
And beginning the process of putting together our 2023.
All of this well positioned to finish 2022 strong.
Got off to a great start for the coming calendar year.
Yeah.
Before we move into the Q&A section I wanted to end on a positive note, we part of our transportation suppliers beginning.
Beginning of the year was lumpy is our real partners working with the rest of their labor challenges and establish new operating practices to create a more reliable service for them.
Also generally continue to see improvement from our rail partners the service moving toward our pre pandemic benchmark levels at certain times, even in the second quarter.
We understand the labor issues are complex and cannot be fully solved overnight, but we are grateful for the effort and cooperation.
It resulted in significantly improved performance.
I will now turn the call back over to Dave.
Yeah.
Oh on Dan's comment I want to thank <unk>, Norfolk, southern their work to improve rail service over the past couple of years. We appreciate those partnerships with that operator, we are now ready to open the call for questions.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad one moment, please while we poll for questions.
Our first question comes from Lucas pipes with B Riley Securities. Please proceed with your question.
Thank you very much operator, good morning, everyone and congratulations on a strong quarter being debt free.
David I wanted to congratulate you on your well deserved retirement, and Andy Todd and Chase and also congratulations on your promotion so.
Lots and lots lots really going really well here. This is terrific to see.
I I wanted to turn my first question to the market and emptied version, we've seen on thermal versus met pricing, you're taking advantage of it this year what are the limits to.
Maybe switching more tons into the thermal coal market. So next year. When you have maybe a freer hand, where where could this go in and how would you frame that up I. Appreciate your thoughts. Thank you.
Yeah.
Hey, Lucas Thanks for the question yes.
Where could it go it was a question I wish I could answer, but you know what we're doing it off as we're looking at these opportunities as they come along and by the way we've been selling.
Thermal coal into the market there are several months youre not just lately.
Some of the constraints that do affect our sons as you probably read already all matter of episodic.
Sizing of the coals, there's a lot of the Utah.
Utilities, particularly in Europe .
A lot of capitals in several years. So there was some technical issues to overcome.
As well as some of the logistic issues, but again for us that's with DTA comes from India for US is we can use DTA as a platform.
Some additional normal over.
I'll start I should start by saying that we still expect the network to be strong we got a big group of customers and they are still in the market. We continue to talk to them.
Globally, we still remain good interest, we still get interest from Asia, including China, We have started.
So there's still plenty of opportunities out there.
But.
The thermal market does as a limitation.
I should start every ton of coal and shifted at all in the marketplace.
<unk>.
I suppose if you were looking for a number we can add easily several hundred thousand tons more into the total market going forward in coming months.
If we see something we like.
Hopefully that answers your question.
And that was on an annual basis that number.
Oh hi.
I don't know about it.
I mean, we're already doing roughly a million tons a year of thermal so we would add to that yes.
With Jason's production increases, we'd be adding something to that.
But I honestly don't have that number.
Okay. Okay.
That's helpful.
And where.
Yeah, Dan I think you've mentioned.
The contract.
And for 2023.
Can you elaborate a bit on on how youre approaching them.
Domestic versus export medical sales here in this environment, obviously met coal market has softened a bit internationally you have a debt free balance sheet that may allow you to take more risk in the international markets.
So.
Yeah.
Two crosscurrents here, but would appreciate your thoughts how you think placement could make sense and if there might be any deviation from.
This is David I'll, let.
I'll I'll make cognizant.
And clean it up.
For me, but.
Yes.
Right Middle of our budget process for 2023, and it will look across the border where our portfolio is as Dan mentioned, we have a lot of our existing <unk>.
Customers that are already.
Speaking with us both domestically and internationally and then we've also with relationships. We developed we're also exploring new markets.
Asia.
This will be this will be.
If you look at historically at Alpha.
Historically been right around that 35% domestic 65%.
National we like that for a lot of fundamental reasons, but I'm not going to go into detail on a public call but.
That's still kind of our sweet spot, but again, we're going to approach the season like we do always we've got some great.
Product great quality, great diversity, and we have strong interest across the board both domestically internationally. So that that decision will be made as we enter the domestic markets, we see but we likely see the pricing that we believe this.
It will fit within our profile, we will take advantage of it and then we obviously have our international side as well.
Raleigh.
Every quarter so.
That is a decision that probably today in that.
No.
And certainly in our November call, we will have some updated information on how we come out with the best side, Dan do you want to try to clean up my comments.
I think you said it well David I will take just issued.
The export market slows down I guess to some other companies yes.
I've mentioned on previous calls in the last year about a year ago when the market started moving up.
We and other companies sign more long term contracts that we had in the past so.
A big report just because theres no deals new deals in the market.
Doesn't necessarily always mean that business is slow if you ship them on a lot of previous contracts. So youll see our numbers here, we shipped 4 million tons in the previous quarter. So I'd.
Take a little exception to the volume part of that certainly the industry's top down but the volumes were off half of it at least remained strong, but we're absolutely looking to.
Don't want any opportunities on the thermal side.
As you grow there and then with regard to the domestic met.
We're still working on the Rfps for goodness sakes, they're not even do so over the next few weeks. So it's really too early to comment.
Detail on what we expect to see there.
Hi, I appreciate the color and I'll ask one final one for today for now.
David You mentioned the improvement on the rail side and that's great to hear.
Could you frame up how the service is today versus.
Or is it at 90% hot better than that where theres still room for improvement if at all thank you very much for your perspective.
You may have more.
Logistics side I can just simply reemphasize, what I said.
Already this year our railroad partners.
Came under a lot of scrutiny.
Right before the surface Transportation Board people, writing letters, we we were having private conversations.
We prefer as a coffee.
I have conversations with our partners in a private setting versus the public study.
But just as they were experiencing labor issues, we were experiencing the same and our industry.
And so we.
We appreciate what they've done we certainly seen significant improvement.
Both <unk> and Norfolk Southern we appreciate.
Their ability to try to ramp up there doing better every day, but with that Dan you're closer to on the logistics side. So.
<unk> insight you might have for well I think I'll just add that when we saw the changes coming with the railroad and the case one railroad there were there were several new changes.
Well I'm going to give a shout out to my team the logistics team for reacting quickly to changing some of the way, we do things and shot up Jason's team.
The people at the prep glass and load outs to react to these changes as well so part of the reason I think we're more successful here in the last quarter.
Is this due to the.
One step without realizing its bit of a different world on the transportation side, we had to change things we do in the business that means worth of training on a Sunday or whatever.
<unk>.
We responded to that too.
That's that's very good to hear I, gentlemen, again, congratulations and continued best of luck.
Thanks, Lucas Thanks Luke.
Our next question is from Nathan Martin with the Benchmark Company. Please proceed with your question.
Hey, good morning, guys congrats.
Congrats on the results and accrue Lucas as Congress congrats on all the transitions being made there by the team I appreciate you taking my questions.
I'll start with Jason I appreciate all your comments related to the thermal business and kind of what's behind the increased guidance for this year, but just want to make sure I caught everything it sounded like slab camp with extending through the first quarter.
You also mentioned, bringing back it was a half a million tons at Republic surface mine I think it was that I hear all that correctly, maybe you can kind of give us more run down and then where are those tons going to be flowing through is that the all other segment or is that still the thermal piece of the met segment.
Hey, Good morning Night, I think I think.
The answer to your latter question, there's probably both.
So let me start with slab camp.
The bonds, Ben we've been talking about it for a year it's been.
Depleting, but you know as the market shift.
Tons that were once considered resources you know are now much more economics, and therefore, we're able to bolt on small sections to the mine.
And you know my mom at a relative good cost to where the market is.
So you did hear me correct, we expect slab camp to operate you know.
Into and maybe mostly through the first quarter.
But again you know we're mining very.
The very end of the mine lives so things are.
Subject to change, but you know, we're ready to move and adjust accordingly, So five camp would hit the all other segment.
And then the Republic permits that we plan to start in the fourth quarter of this year you did hear me right that it's upwards of half a million tons and these are.
I guess currently inactive surface mine permits.
But they would be and they all I'm, sorry that would be in the.
<unk> met segment, but they'd be incidental thermal tons to the med segment, but available.
Will be sold into the thermal markets does that answer your questions.
Yeah, No. That's that's perfect Jason I think the other one maybe that you mentioned.
Caught correctly with Black Castle.
Yeah.
We mentioned that on the last earnings call, but maybe maybe my memory's fuzzy, but we have been releasing tons.
Not large amounts from.
From Black Castle in the second quarter and that'll continue through most of the year, but it's smaller volumes I would I would estimate that somewhere between 80 and 100 and 110000.
That would be in the med segment, but would be in the other incidental thermal bucket.
Got it Thats very helpful. Jason Thank you and then maybe.
Sticking with other thermal for a second kind of on the cost side you guys maintained cost guidance 58 to $62 per ton. Obviously first half is done extremely well below 50 Bucks.
What do you foresee kind of increasing.
Costs in the second half there if that's the case since at.
At the end of the swap camp.
My wife is you spoke about.
I think I think you nailed it there it's just.
There'll be a recovery type work and mine close up type work and it being spread across fewer tons in.
And probably expect to see a bit of an increase there.
I'll, let Andy comment if he has anything to add.
No that's it Jason nailed it.
Okay.
Great I appreciate it I appreciate those thoughts guys and then.
Maybe just kind of shifting to a high level question.
Cash return side you guys raised your regular dividend flight in this morning.
A clear preference has been share buybacks nearly completing half of that 600 million dollar program and so far it looks like now.
Now lets you essentially paid off all your debt what are kind of the priorities for cash going forward here. How are you thinking about balancing shareholder returns with other uses of cash.
Those might be.
Investing in the business organically and then as you pointed out earlier M&A things like that and then any minimum liquidity or cash levels you guys like to keep.
Yeah.
Yes, Nate this is.
David.
Broad questions, Let me, let me see.
Start high level, you can drill down as much as you want to as we stated on previous earnings calls.
Marty was paying our debt off so we checked that box.
Our other priority was twofold, one to increase cash balances and the other was to reward our shareholders for their loyalty over these past years. So we commenced.
Our earnings program earlier this last quarter, we increased it to $600 million. We have spent as we heard earlier approximately 50% of that has been spent in the market.
From our perspective, we're going to continue our share repurchase program. We believe our shares are undervalued. Therefore, it's a good place for investment we will continue to increase our cash balances as we move forward.
He mentioned we.
<unk>, our Taiwan and some opportunities in the M&A side.
But to no avail. So we as you know we have a large and diverse reserve base, we're constantly evaluating.
That reserve base with purpose of bringing on.
The production, but you'll also recall the previous quarter, we went through a 15 year mining plan.
That show that the next 15 years, we simply mind, what we currently have in place we do not need any large capital projects on the other hand, we're constantly evaluating opportunities to either.
Hold on and make some incremental production increases and or replace existing bonds with more efficient.
So from my perspective.
Where we are.
Not deviating from our strategy, we're going to continue to do a share return programs.
Our share repurchase we're going to continue to build strong cash balances.
That is where.
Our future is sandy.
Let you.
Provide any other additional commentary yeah, I think that hits it all David the other question Nathan She is with no minimum.
As your minimum liquidity levels, and while that's not a hard and fast rule and theres really not much but I do think that broadly.
Broadly speaking, we like to look at.
Somewhere in that $250 million to $300 million range.
Our total liquidity target of course, including an ABL and that makes a deal can be as volatile as anything else based on where the markets are so.
You can't always rely on the ABL to provide roughly $100 million liquidity, so we need to probably thinking a little bit less on that over the full cycle, so probably somewhere in that $250 million to $300 million range is what we're going to target.
And that will naturally wax and wane as David mentioned, we've got the 15 year plan is a bit of a guide.
We're also going through our.
Budget cycle for 2023, and that will inform what kind of capital projects will be looking at for next year, but.
As we said the past couple of calls we don't have those those huge projects that really require any <unk>.
<unk> deviation from any of our plans, we can kind of do most of the things we want to do.
At once.
No.
The decent markets up to really good markets, we're experiencing now.
That has certainly been the case it should be going forward.
Got it I appreciate the comments guys all Oh I'll leave it there. Thank you for the time and the permission and best of luck in the second half.
Thanks, Dan Thank you Nate.
Our next question is from Jonathan <unk> with Cowen. Please proceed with your question.
Hey, good morning, everyone.
Lance.
Congrats on the corner and smallest everybody with the new promotions.
My first one is can you touch maybe a little bit on the cadence of shipments for the remaining of two quarters.
I'd say sitting.
Sitting here today, I think pro rata as well so I don't see any.
Big changes, we have fair amount of our bookings are committed we have.
We're just starting to talk about Q4 with our seaborne customers typically we start to find out what their.
Schedules are the dog is so.
But at this point.
I'd say.
That would be a pro rata shifting well, we'll know whether some of those tons for Burt for met or thermal is still to be determined I expect some of them well I don't have a number in my head yet, though we're in discussions with.
There's more thermal coal customers at the moment.
More to come on that.
Understood, Okay, and I guess somewhat related but.
Sorry, if I'm, beating a dead horse here, but.
In terms of revenue can we expect the second quarter to be the peak of the year or can we maybe expect a gradual decrease quarter on quarter from here until the fourth quarter.
Hey, Jonathan this is Andy.
Yeah, I mean, just based on actual realizations of where the futures are sitting through the rest of the year at least wanting right now I think Q2 doesn't appear to be the high watermark.
It does those it was very very high water.
But yeah it looks like the.
While the curve is and is still in a bit of contango going into Q4 Q1 of next year. It looks like there's overall going to be Oh.
A downlink as compared to Q2.
Yeah that makes sense.
And then just two more on my end I noticed I noticed the increase in SG&A guidance is all of that really composed of.
Of incentive comp or are there other items.
Better than there.
Yes.
It's a combination of multiple items, Jonathan but the primary thing the primary impact is coming from <unk>.
Cash impacts on our <unk> program and incentive compensation naturally the outperformance in the first half of the year.
Jobs, all those programs and so we're just adjusting the accrual for that now depending on where the pricing goes that Mei Mei.
It may come down a little bit over the back half of the year, but that's just kind of getting us caught up based on extraordinary first half on the Super extraordinary second quarter, yes.
Okay got it and just my last one.
In terms of inflation and labor how are you seeing what are your expectations or how are you guys thinking in terms of the second half of the year.
Well, let me grab that and we haven't changed guidance some of our cost back.
No I think.
It's obviously a struggle Jason mentioned in his prepared remarks.
The amount of additional cost.
But into the system to maintain.
Our employment and keep our hopes.
I'm happy and productive and to try to.
That will some of the the.
It exited from the coal industry.
But all of that's baked into the cost, we're obviously seeing some productivity.
Improvements elsewhere in Jason's team as always.
Finding a couple of places to save save some.
Find some productivity enhancements to reduce cost to offset some of these things, but I don't think there's anything specific that we can point to as far as additional cost impact from.
From labor inflation, but Jason if theres anything you want to add specific.
Just what youre seeing in the labor markets.
No I think I think you said Andy we've.
As we've mentioned, we've we've done what's necessary to stay competitive and I.
I think I think Andy said it I believe we'll be able to stay in the range through the rest of the year.
Got it thank you and congrats again.
Thanks Lisa.
Sure.
We have reached the end of the question and answer session I will now turn the call over to David Stetson for closing remarks.
Hello, and thank you everybody for getting on the call a stay I want to reiterate my.
Depreciation and being humbled to lead Alpha where these past six years.
Much appreciate the team.
Not only my executive team, but the.
People that work for us that a day in our minds and in other parts of our country accompany I really.
I can't tell you much appreciate it and obviously the support of <unk>.
My board of directors and our shareholders over the past six years since the nominal I want to thank each and every one of them for that support loyalty with that we'll close the call. Thank you once again for joining us.
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.