Q4 2023 Peabody Energy Corp Earnings Call
Operator: Good morning, and welcome to the Peabody fourth quarter 2023 earnings conference call. Our participants will be in listen-only mode.
Good morning, and welcome to the Peabody first quarter 'twenty twenty-three earnings conference call.
All participants will be in listen only mode.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on your telephone keypad.
Should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on your telephone keypad.
Operator: To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Carla Kimrey, Vice President of Investor Relations. Please go ahead.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
I'd now like to turn the conference over to Karla Kimrey, Vice President of Investor Relations. Please go ahead.
Karla Kimrey: Good morning, and thanks for joining peabody's earnings call for the fourth quarter and full year of 2023 with me today are president and CEO, Jim Grech, CFO, Mark Sperbeck, and our Chief Marketing Officer, Malcolm Roberts within the earnings release, you will find our statement on forward looking information as well as a reconciliation of.
Carla Kimrey: Good morning, and thanks for joining Peabody's earnings call for the fourth quarter and full year of 2023. With me today are President and CEO Jim Grech, CFO Mark Spurbeck, and our Chief Marketing Officer, Malcolm Roberts. Within the earnings release, you will find our statement on forward-looking information, as well as a reconciliation of non-GAAP financial measures. We 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, Carla, and good morning, everyone.
non-GAAP financial measures, we 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.
Jim Grech: Thanks, Carlo and good morning, everyone.
Jim Grech: For the full year 2023, our operations performed as expected, delivering another year of strong results, allowing us to further enhance shareholder value. We pre-funded our long-term mine closure and reclamation obligations and implemented a robust shareholder return plan, which resulted in reducing our shares outstanding by over 11%. We also continue to strategically reinvest in our MET portfolio for our Centurion development project, the pending acquisition of a large portion of the Ward's Well Reserve adjacent to the project, and the purchase of the new lawn walk kits at our Shoal Creek and Metropolitan operations.
For the full year 2023, our operations performed as expected delivering another year of strong results, allowing us to further enhance shareholder value.
Jim Grech: We pre funded our long term mine closure and reclamation obligations and implemented a robust shareholder return plan, which resulted in reducing our shares outstanding by over 11%.
We also continued to strategically reinvest in our met portfolio.
Jim Grech: Turn on development project dependent.
Jim Grech: The pending acquisition of a large portion of the awards while reserve adjacent to the project.
Jim Grech: And the purchase of the new longwall kits at a shoal Creek and Metropolitan operations.
Okay.
Jim Grech: In the fourth quarter of 2023, we produced strong results despite a non-peabody-related train derailment on the mainline in Australia that interrupted some deliveries in December. We continue to advance the development of our Centurion Premium Hard Coking Coal project and successfully put the new Longwell at Chill Creek into production ahead of schedule, given the March mine fire at Choke Creek. This was an incredible achievement that would not have been possible without the efforts of our dedicated employees working in close coordination with them. Before I expand on the markets, I want to thank our global employees for their continued focus and commitment to working safely and efficiently, coming off our lowest annual global injury rate in company history last year. This year we achieved our second best annual global injury rate and a record low injury rate in Australia for a calendar year. Our Wolf and Young Lions teams celebrated two years with no lost time incidents.
In the fourth quarter of 2023, you produce strong results. Despite a non Peabody related train derailment on the mainline in Australia.
Jim Grech: Shifting some deliveries in December.
Jim Grech: We continue to advance development of our Centurion premium hard coking coal project.
Jim Grech: Successfully put the new longwall at Shoal Creek into production ahead of schedule.
Jim Grech: Given the March mine fire at Shoal Creek.
Jim Grech: This was an incredible achievement would not have been possible without the efforts of our dedicated employees working in close coordination with Amgen.
Jim Grech: Before I expand on the markets I want to thank our global employees for their continued focus and commitment to working safely and efficiently.
Jim Grech: Coming off our lowest annual global injury rate in company history last year.
Jim Grech: We achieved our second best annual annual global injury rate and a record low injury rate in Australia for a calendar year.
Jim Grech: I won't put you on mine celebrated two years with no lost time incidents.
Jim Grech: Our 20-mile mine won the Sentinels of Safety Award for the second year in a row, recognizing the mine as the safest underground mine in the U.S. Now turning to the global coal market, T-Borne Thermal Coal Markets were range-bound during the quarter. Elevated coal and natural gas inventories in the Northern Hemisphere have continued to weigh on demand for high-energy thermal coal, coupled with an increased supply from the east coast of Australia, resulting in Newcastle coal trading within a range of $120 to $150 a ton. However, Asian thermal coal imports continue to grow, with China reporting that thermal coal imports totaled 354 million metric tons for 2023, increasing by 62% compared with In contrast, Japan and Korea are on track to record mild decreases in imports for 2023.
Jim Grech: Our 20 mile mine when the Sentinels of Safety award for the second year in a row.
Recognizing the mine is the safest underground mine in the U S.
Jim Grech: Now turning to the global coal markets.
Jim Grech: Seaborne thermal coal markets were range bound during the quarter.
Jim Grech: Elevated coal or natural gas inventories in the northern hemisphere have continued to weigh on demand for high energy thermal coal.
Jim Grech: Coupled with an increased supply from the east coast of Australia, resulting in Newcastle coal trading within a range of 120 to $150 a ton.
Jim Grech: Asian thermal coal imports continued to grow with China reporting that thermal coal imports totaled $350 million 354 million metric tons for 2023, increasing.
Jim Grech: Increasing by 62% compared with the year ago level, and we're by far the largest contributor to Asian import growth.
Jim Grech: In contrast, Japan and Korea are on track to record mild decreases in imports for 2023.
Jim Grech: Within the seaborne metallurgical coal market, the volatility, which characterized the first nine months of 2023, continued during the balance of the year. The steel sector outside of China showed growth in crude steel output during the three months ended December 31, 2023, led mainly by India and its ongoing strong economic expansion. Total crude steel output during the period, however, contracted because of a sharp decline in Chinese production, where steel producers reported thin margins and slower domestic demand.
Jim Grech: Within the seaborne metallurgical coal market the volatility would you characterize the first nine months of 2023 continued during the balance of the year.
Jim Grech: The steel sector outside of China showed growth in crude steel output during the three months ended December 31 2023.
Jim Grech: But mainly by India and its ongoing strong economic expansion.
Jim Grech: Total crude steel output during the period, however, contracted because of the sharp decline in Chinese production.
Jim Grech: Producers reported thin margins and slower domestic demand.
Jim Grech: Premium hard coking coal indices finished the quarter marginally lower, around $323 a ton. However, the outlook for the metallurgical coal market remains positive, with seaborne supply remaining below historical levels, combined with strong Indian purchase interest and new import demand for steel-making coals within Southeast Asia. In comparison, PCI and semi-soft coking coals observed more substantial price reductions in the United States. However, electricity generation from thermal coal has declined year on year due to low gas prices and the impacts of renewable generation.
Jim Grech: Premium hard coking coal indices finished the quarter marginally lower around $323 a ton.
Jim Grech: The outlook for the metallurgical coal market remains positive with seaborne supply remaining below historical levels.
Jim Grech: Binding with strong Indian purchase interest and new import demand for steelmaking coal's within southeast Asia.
Jim Grech: In comparison, PCI and semi soft coking coals observed more substantial price reductions.
Jim Grech: In the United States.
Jim Grech: Electricity generation from thermal coal has declined year on year due to low gas prices and the impacts of renewable generation.
Jim Grech: The near term demand outlook is anticipated to be challenged by comparatively high generator inventories as we transition into the post winter shoulder season.
Jim Grech: The near-term demand outlook is anticipated to be challenged by comparatively high generator inventories as we transition into the post-winter shoulder season. Renewables continue to grow as part of the energy mix. However, we have seen several of our customers delay the retirement of some of their plants in order to ensure grid reliability.
Jim Grech: Renewables continue to grow as part of the energy mix. However.
Jim Grech: We have seen several of our customers delay the retirement of some of their plants in order to ensure grid reliability.
Jim Grech: Now moving on to our operating segment. Our seaboard thermal fourth-quarter coal volumes came in at 3.7 million tons, which was lower than anticipated, primarily due to a train derailment on the mainline, which served our Wilton Young mine. The derailment occurred on December 6th and impacted shipments for 10 days.
Jim Grech: Now moving on to our operating segments.
Jim Grech: Our seaborne thermal fourth quarter coal volumes came in at $3 7 million tons, which was lower than anticipated primarily due to a train derailment in the main language serves all open young minds.
Jim Grech: The development occurred on December six and impacted shipments for 10 days.
Jim Grech: Segment costs per ton were at the high end of our range due to the lower shipment volume. Our Seabourn MET segment shipments were 2.1 million tons in a quarter, in line with expectations, while total segment costs were better than anticipated at $108 per ton. In December, we were able to successfully commence new longwall production at Shoal Creek in the newly developed L-Panel District ahead of schedule, and PRB shipments of 23.6 million tons were better than anticipated. This quarter, Peabody increased its production share of the total PRV shipments from 39% in the third quarter to 43% in the fourth quarter, and other U.S. thermal shipments of 3.7 million tons, slightly below expectations as we had a few customers reduce their demand due to high inventories and natural gas prices.
Jim Grech: Segment costs per ton were at the high end of our range due to the lower shipments.
Jim Grech: Our seaborne met segment shipments were $2 1 million tons in the quarter inline with expectations, while total segment costs were better than anticipated $108 per ton.
Jim Grech: In December we were able to successfully commenced new longwall production at Shoal Creek in the newly developed L Panel District ahead of schedule.
Jim Grech: And the PRP shipments of $23 6 million tons were better than anticipated.
Jim Grech: This quarter Peabody increased our production share of the total PRP shipments from 39% in the third quarter to 43% in the fourth quarter.
Jim Grech: Another U S thermal shipments were $3 7 million tonnes slightly.
Jim Grech: Slightly below our expectations as we had a few customers reduce their demand due to high inventories of natural gas pricing.
Jim Grech: Outside of our active operations, we continue to make progress at the Centurion Mine, our key metallurgical coal growth project. In December, we renamed North Guinea as a Centurion mine, signifying a new chapter in our operation. The Centurion Complex will include the former North Gugnella Mine along with the new Wards Well Deposit, which is adjacent to our existing property. We anticipate closing on the Wardswell transaction in the second
Jim Grech: Outside of our active operations, we continue to make progress at the Centurion mine.
Jim Grech: Our key metallurgical coal growth project.
Jim Grech: In December.
Jim Grech: We renamed North Daniela as the Centurion mind Cigna.
Jim Grech: Signifying a new chapter in our operations.
Jim Grech: The Centurion complex will include the former North Green Yellow line, along with the New awards, while deposit which is adjacent to our existing property.
Jim Grech: We anticipate closing on the awards of all transaction in the second quarter.
Jim Grech: At site, we continue to advance on initiatives to support the commencement of development colon April.
Jim Grech: At site, we continue to advance on initiatives to support the commencement of development call in April, including the installation of a new conveyor system and the commissioning of equipment for underground development. We're also making progress with building out the workforce, as we welcomed our first group of permanent underground workers, who will continue to onboard additional underground operators and maintenance staff to support the scaling up of development. We continue to expect our first sales of Development Coal in the second half of 2024 and Longwall Coal in 2026. We enter the new year with a diverse platform that gives us the stability and consistency to deliver results, allowing us to return cash to shareholders and advance major projects as we reweight our portfolio to more seaborne poles. As we look forward to 2024, we are focused on executing our strategy by continuing to deliver consistent, predictable, and reliable performance from our operations.
Jim Grech: Including installation of a new conveyor system and the commissioning of equipment for underground development.
Jim Grech: We're also making progress with building out the work for us as we welcomed our first group of permanent underground workers.
Jim Grech: We will continue to onboard additional underground operators and maintenance staff to support the scaling up of development.
Jim Grech: We continue to expect our first sales of development coal in the second half of 'twenty 'twenty, four and longwall coal in 'twenty 'twenty six.
Jim Grech: We entered the new year with a diverse platform that gives us the stability and consistency to deliver results, allowing us to return cash to shareholders in advance of major projects as we we weight our portfolio to more seaborne coal.
Jim Grech: As we look forward to 'twenty 'twenty four we are focused on executing our strategy by.
Jim Grech: Continuing to deliver consistent predictable and reliable performance from our operations.
Mark A. Spurbeck: Advancing Centurion, our tier one premium hard coking coal development project, in delivering value to our shareholders through our previously announced shareholder return program. I'll now turn it over to Mark to cover the financial details. Thanks, Jim.
Jim Grech: Advancing centurion, our tier one premium hard coking coal development project.
Mark: And delivering value to our shareholders through our previously announced shareholder return program.
Mark A. Spurbeck: I'll now turn it over to Mark to cover the financial details.
Mark: Thanks, Jim in the fourth quarter, we recorded net income attributable to common stockholders of $192 million or $1 33 per diluted share and adjusted EBIT of $345 million for.
Mark A. Spurbeck: In the fourth quarter, we recorded net income attributed to common stockholders of $192 million, or $1.33 per diluted share, and adjusted EBIT of $345 million. For the full year, we recorded net income of $760 million, or $5 per diluted share, and adjusted EBITDA of $1.4 billion. The company generated $1.1 billion of operating cash flow from continuing operations and $724 million of available free cash.
Mark A. Spurbeck: For the full year, we recorded net income of $760 million or $5 per diluted share and adjusted EBITDA of $1 4 billion.
Mark A. Spurbeck: The company generated $1 1 billion of operating cash flow from continuing operations and 724 million of available free cash flow.
Mark A. Spurbeck: Based on these results, we have announced the return of $471 million to shareholders, primarily through shared buy-in. Through December 31st, we have repurchased $16.1 million, better than 11% of shares outstanding, and we have $80 million more to deploy in the first quarter. Turning now to segment results, in the fourth quarter, Seward Thermal recorded $100 million of adjusted EBIT.
Mark A. Spurbeck: Based on these results, we have announced the return of $471 million to shareholders primarily through share buybacks.
Mark A. Spurbeck: December 31, we have repurchased $16 1 million shares better than 11% of shares outstanding and have 80 million more to deploy in the first quarter.
Mark A. Spurbeck: Turning now to segment results in the fourth quarter seaborne thermal reported a $100 million of adjusted EBITDA.
Mark A. Spurbeck: Tons shipped were less than anticipated primarily due to a rail issue on the mainline, which limited Wilpignonk shipments and moved costs toward the higher end of the line. For the full year, the Seabourn Thermal Segment reported $577 million of adjusted EBIT, export shipments increased to $10 million, and the segment achieved adjusted EBITDA margins of 43%. The Seabourne metallurgical segment generated $166 million of adjusted EBITDA in the fourth quarter, more than double the prior quarter's result as both shipments and realized prices were substantially higher, costs of $108 per ton were below the low end, as Shoal Creek achieved a great, earlier-than-expected start of a new longwall in the L-panel district. For the full year, the Seaborne metallurgical segment reported $438 million Despite a tough transition year at Shoal Creek.
Mark A. Spurbeck: Tons shipped were less than anticipated primarily due to a rail issue on the mainline, which limited Wilton young shipments and moved cost toward the higher end of guidance.
Mark A. Spurbeck: For the full year.
Mark A. Spurbeck: Seaborne thermal segment reported $577 million of adjusted EBITDA ex.
Mark A. Spurbeck: Export shipments increased to 10 million tons in the segment achieved adjusted EBITDA margins of 43%.
Mark A. Spurbeck: The seaborne metallurgical segment generated 166 million of adjusted EBITDA in the fourth quarter more than double the prior quarter's result, as both shipments and realized prices were substantially higher cost of $108 per ton were below the low end of guidance at Shoal Creek achieved a great earlier than expected start of the new.
Mark A. Spurbeck: Longwall in the L panel district.
Mark A. Spurbeck: For the full year, the seaborne metallurgical segment reported 438 million of adjusted EBITDA shipments.
Mark A. Spurbeck: Shipments increased to $6 9 million tonnes, despite a tough transition year at Shoal Creek the.
Mark A. Spurbeck: The segment achieved adjusted EBITDA margins of 34%, a favorable result considering our average realized price was $55 per tonne lower than last year, as a result of weaker PCI, cold. The PRB mines shipped 23.6 million tons, our highest quarterly volume since 2019, a testament to our team's full recovery from the mid-year tornado disruption, putting them in a position to seize an opportunity to load additional trains. Higher shipments were partially offset by additional repairs and other costs, resulting in $38 million of adjusted EBITDA for the quarter. For the full year, adjusted EBITDA was $154 million, more than double last year.
Mark A. Spurbeck: The segment achieved adjusted EBITDA margins of 34% a favorable result, considering our average realized price was $55 per ton lower than last year as a result of weaker PCI coal prices.
Mark A. Spurbeck: The P. R. B mind shipped $23 6 million tonnes, our highest quarterly volume since 2019.
Mark A. Spurbeck: A testament to our team's full recovery from the midyear tornado disruption.
Mark A. Spurbeck: Putting themselves in a position to seize an opportunity to load additional trains.
Mark A. Spurbeck: Higher shipments were partially offset by additional repairs and other costs.
Mark A. Spurbeck: The other thing and 38 million of adjusted EBITDA for the quarter.
Mark A. Spurbeck: For the full year adjusted EBIT was 154 million more than double last year as we continue to benefit from the sales book rebuilt during 2021 and 2022 where we favored longer term contracts with improved pricing over shorter term contracts at spot pricing levels.
Mark A. Spurbeck: As we continue to benefit from the sales book we built during 2021 and 2022, where we favored longer-term contracts with improved pricing over shorter-term contracts at spot prices, year over year, our average realized price increased $0.85 per ton, or nearly $0.07, and over the last two years, our PRB average realized price is up $25. The other U.S. thermal mines delivered $42 million of adjusted EBITDA in the fourth quarter. However, production was impacted by the planned long-wall move at 20-mile and lower volumes from certain customers reduced shipments below guidelines.
Mark A. Spurbeck: Year over year, our P. M. B average realized price increased 85 cents per ton or nearly 7% and over the last two years, our average realized price is up 25%.
Mark A. Spurbeck: The other U S thermal mines delivered $42 million of adjusted EBITDA in the fourth quarter.
Mark A. Spurbeck: Production was impacted by the planned longwall move at 20 miles and lower volumes from certain customers reduced shipments below guidance.
Mark A. Spurbeck: However, we benefited from a substantial increase in the average realized price to $57 per ton due to buyouts and compensation payments from these customers. As a result, segment EBITDA exceeded implied guidance. For the full year, Adjusted EBITDA was $208 million, and we achieved segment-adjusted EBITDA margins of 23%. Together, the U.S. thermal mines produced $361 million of adjusted EBITDA in 2023, an increase of $51 million over the previous year. Looking ahead to 2024, we expect another year of consistent operating and financial results. Seaborne thermal volumes are expected to be very similar to 2023.
Mark A. Spurbeck: However, we benefited from a substantial increase in the average realized price to $57 per ton due to buyouts and compensation payments from these customers.
Mark A. Spurbeck: As a result segment EBITDA exceeded implied guidance.
Mark A. Spurbeck: For the full year adjusted EBITDA was $208 million and we achieved segment adjusted EBITDA margins of 23%.
Mark A. Spurbeck: Together the U S. Thermal mines produced 361 million of adjusted EBITDA in 2023, an increase of $51 million over the previous year.
Mark A. Spurbeck: Looking ahead to 2024, we expect another year of consistent operating and financial results.
Mark A. Spurbeck: Good morning thermal volumes are expected to be very similar to 2023. However, we anticipate benefiting from a higher proportion of Newcastle spec product due to mine sequencing at the Womble open cut mine.
Mark A. Spurbeck: However, we anticipate benefiting from a higher proportion of Newcastle's SPEC product due to mine sequencing at the Whambo Open Cut. Shipments are anticipated to be 15 to 16 million tons, including 10 million export tons, and costs are projected to be consistent with 2023 levels at $45 to $50 per ton. Seaborne metallurgical volumes are projected to increase by 1 million tons to 8 million, primarily due to a full year of production from the newly installed longwall at Schultz. Segment costs are expected to improve to $110 to $120 per ton. In the PRB, we are forecasting shipments of 80 to 87 million tons, and we have 85 million tons priced at 13.7. Costs are expected to remain mostly flat, with 2023 levels at $11.75 to $12.50 per ton.
Mark A. Spurbeck: Shipments are anticipated to be 15 to 16 million tons, including 10 million export tons and costs are projected to be consistent with 2023 levels at 45 to $50 per ton.
Mark A. Spurbeck: Seaborne metallurgical volumes are projected to increase by 1 million tons to $8 million, primarily due to a full year of production from the newly installed longwall at Shoal Creek segment costs are expected to improve to 110 to $120 per ton.
Mark A. Spurbeck: And the P. RB we are forecasting shipments of 80 to 87 million tons, and we had 85 million tons priced at 13 70.
Mark A. Spurbeck: Costs are expected to remain mostly flat with 2023 levels at 11, 75 to 12 and a half dollars per ton.
Mark A. Spurbeck: Other U S. Thermal volume is expected to be 15 million tons down slightly from 2023, as we transition from the El Segundo to Lee Ranch reserves out west.
Mark A. Spurbeck: Other U.S. thermal volume is expected to be 15 million tons, down slightly from 2023, as we transition from the El Segundo to Lee Ranch Reserves Outlook. We have 15.2 million tons priced at $5,370 and expect costs in the range of $41 to $45 per ton, largely consistent with last year. Total capital expenditures are estimated at $375 million, including $235 million of project capital, primarily for the continued development of Centurion and sustaining capital of $140 million. Additionally, we expect to close the previously announced acquisition of the ward's well cold deposit. Specifically for the first quarter, Seabourn Thermal Volumes are expected to be $3.9 million, including two and a half million, as we ramp up from the Wombo Underground Longwall move from the fourth quarter of last year. Cost per ton is expected to be consistent with the prior quarter at $48 to $53 per ton. Seaborne metallurgical volumes are expected to be lower than rateable at 1.4 million, with costs temporarily elevated at $130 to $140 per ton, primarily due to a long-wall movement metro and mine sequencing at the CMJV.
Mark A. Spurbeck: We have 15.2 million tons priced at $53 70, and expect costs in the range of 41 to $45 per ton largely consistent with last year.
Mark A. Spurbeck: Total capital expenditures are estimated at $375 million, including $235 million of project capital primarily for the continued development of Centurion and sustaining capital of $140 million.
Mark A. Spurbeck: Additionally, we expect to close the previously announced acquisition of the wards welcomed deposit.
Mark A. Spurbeck: Specifically for the first quarter seaborne thermal volumes are expected to be $3 9 million tonnes, including two and a half million export tons as we ramp up from the Huambo underground longwall move from the fourth quarter of last year.
Mark A. Spurbeck: Cost per ton are expected to be consistent with prior quarter at 48 to $53 per ton.
Mark A. Spurbeck: Seaborne metallurgical volumes are expected to be lower than ratable at one 4 million tonnes with cost temporarily elevated at 130 to 140 per ton primarily due to a longwall move at Metropolitan and mine sequencing at the <unk> JV.
Mark A. Spurbeck: We also continue to monitor the Demopolis Lock situation, a lot under repair that has the potential to temporarily increase transportation costs at Scholl Creek, but we don't anticipate a financial impact in the first quarter. We expect to ship 21 million tons of PRB coal in the quarter, with costs largely consistent with the prior quarter, at $11.75 to $12.50 per ton. Other U.S. thermal coal shipments are expected to be in line with the prior quarter at 3.6 million tons, while costs improve to $41 to $45.
Mark A. Spurbeck: We also continue to monitor the Demopoulos lock situations.
Mark A. Spurbeck: Under repair that has the potential to temporarily increased transportation cost Shoal Creek, but we don't anticipate a finance to impact our first quarter results.
Mark A. Spurbeck: We expect to ship 21 million tons of coal in the quarter with costs largely consistent with the prior quarter and $11 75 to $12 50 per ton.
Mark A. Spurbeck: Other U S thermal coal shipments are expected to be in line with the prior quarter at $3 6 million tonnes, while costs improved to 41% to $45 per ton.
Operator: In summary, Peabody delivered another year of consistently strong results and generated substantial EBITDA, and, most importantly, free cash. Peabody's diversified portfolio of mines is uniquely positioned, having generated approximately 40% of adjusted EBITDA from the seaboard metallurgical segment. 40% from the Seabourn Thermosign and 20% from the U.S. thermal segments over the last two years. After repaying the last of our secure debt in 2022, last year we pre-funded all future mine closure and reclamation obligations, further enhancing the company's financial strength and flexibility. With our financial and environmental liabilities addressed, we reinstated a robust shareholder return program and announced the return of $471 million to our shareholders based on 2023 results. Last month, we announced a new $320 million revolving credit, further enhancing the company's financial resiliency during the development period it's ensuring.
Mark A. Spurbeck: In summary, Peabody delivered another year of consistently strong results and generated substantial EBITDA and most importantly free cash flow.
Operator: Peabody's diversified portfolio of mines is uniquely positioned having generated approximately 40% of adjusted EBITDA from the seaborne metallurgical segment, 40% from the seaborne thermal segment and 20% from the U S thermal segments over the last two years.
Operator: After repaying the last of our secured debt in 2022 last year, we pre funded all future mine closure and reclamation obligations further enhancing the companys financial strength and flexibility.
Operator: With our financial and environmental liabilities addressed we reinstated a robust shareholder return program and announced the return of $471 million to our shareholders based on 2023 results.
Operator: Last month, we announced the new $320 million revolving credit facility further enhancing the companys financial resiliency during the development period, it's ensuring we anticipate achieving our goal of further weighting peabody's long term cash flow towards premium hard coking coal when longwall production begins in 2026.
Operator: We anticipate achieving our goal of further weighting Peabody's long-term cash flow towards premium hard coking coal when long-wall production begins in 2020. We've remained focused on creating shareholder value, operating safe and efficient mines, maximizing free cashflow and shareholder returns, and continuing the development of Centurion, all while maintaining our financial. Operator, I'd now like to turn the call over to you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.
Operator: We remain focused on creating shareholder value operating safe and efficient mines, maximizing free cash flow and shareholder returns and continuing development of its insuring, all while maintaining our financial strength.
Speaker Change: Operator, I'd now like to turn the call over for questions.
Speaker Change: We will now begin the question and answer session.
Operator: To ask a question you May press Star then one on your telephone keypad.
Operator: If you are using a speakerphone please pick up your handset before pressing the keys.
Lucas N. Pipes: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble the roster. And our first question comes from Lucas Pipes of B. Reilly Securities. Please go ahead. Thank you very much, operator. Good morning, everyone.
Speaker Change: To withdraw your question. Please press Star then two.
Operator: At this time, we will pause momentarily to assemble the roster.
Lucas N. Pipes: And our first question comes from Lucas pipes of B Riley Securities. Please go ahead.
Lucas N. Pipes: Thank you very much operator, good morning, everyone.
Lucas N. Pipes: My first question is on the met coal guidance for 2024.
Lucas N. Pipes: My first question is on the METCO guidance for 2024. A nice, nice outlook there. And a double question.
Lucas N. Pipes: Nice nice outlook there and.
Lucas N. Pipes: Two fold question first would you be able to provide a breakdown of the quality of met coal at the midpoint call. It 8 million tonnes and then.
Unnamed Speaker: First, would you be able to provide a breakdown of the quality of METCO at the midpoint, call it eight million tons? And then how many development tons from Centurion would be included in that guide? Thank you very much. Hi Lucas. Good morning.
Unnamed Speaker: How many development tons from Centurion would be included in that in that guide. Thank you very much.
Speaker Change: Hi, Lucas Good morning, Yeah, we're real pleased with the 8 million tonnes for the full year 2024 are really stepping up a million tons and really based on a good production from Shoal Creek.
Unnamed Speaker: Yeah, we're really pleased with the eight million tons for the full year 2024, really stepping up a million tons and really based on good production from Shoal Creek. As you're aware, we have a little bit of development coal that we expect out of Centurion. We'll be getting that coal and building inventories. Probably, sales will be light, closer to, you know, 100, 150,000 tons. When we look at the total over the portfolio, we're probably looking at about four million tons of PCI and, you know, about a million and a half high-volley ball products, primarily from Shoal Creek. Thank you, The Balance. Maybe I didn't catch it all.
Unnamed Speaker: As you are aware, we have I'm, a little bit of development call that we expect out of us ensuring we will be getting that coal and building inventories probably sales will be light closer to Uh huh.
Unnamed Speaker: 100 150000 tons.
Unnamed Speaker: When we look at the total over the portfolio, we're probably looking at about 4 million tons of PCI and Ah you know about a million and a half.
Unnamed Speaker: High Vol, a product primarily from Shoal Creek.
Unnamed Speaker: Okay.
Unnamed Speaker: Thank you the balance maybe I didn't catch it all.
Unnamed Speaker: Yeah, the rest of that is metropolitan, got it, which is kind of a semi-hard-coking goal, quote, be the best index for metropolitan. I mean, we continue to look at the whole portfolio and achieving that off of a premium hard-coking Coleman 65 to 70 percent. Malcolm, maybe you want to address the relativities of those products.
Unnamed Speaker: Yeah, the rest of that is metropolitan.
Unnamed Speaker: Got it which is kind of a semi hard coking coal.
Malcolm: What would be the best index for Metropolitan.
Malcolm: I mean, we continue to look at the whole portfolio.
Malcolm: And achieving that a awful lot of our premium hard coking coal and then 65% to 70%, but melco, maybe you want to address the relativity of that probiotics.
Malcolm: Yeah look we don't we don't at least independently each of whom ashamed relativity piece.
Malcolm Roberts: Yeah, look, we don't list separately each of our assumed relativities, but Medtrop is clearly priced against Prime, Low, Vol, Huck, Coke, and Coal, and I'll add a small list again. Very helpful. I appreciate that. Thank you. Then, kind of staying on the medical side, for Centurion, could you remind us of the CAPEX budget, the total CAPEX budget? Has that evolved?
Malcolm Roberts: Metro piece is clearly priced against the problem loads hauled hard coking coal.
Malcolm Roberts: Okay.
Malcolm Roberts: At a small discount to that.
Malcolm Roberts: Very helpful.
Malcolm Roberts: I appreciate that thank you and then kind of staying on the met coal side.
Malcolm Roberts: Or what Centurion could you remind us of the cash.
Malcolm Roberts: Capex budget.
Malcolm Roberts: The total Capex budget has that has that evolved is that under review.
Lucas N. Pipes: Is that under review? And kind of looking out to 2025 and beyond, what would be left in terms of capital expenditures at... Thank you. Yeah, Lucas. I'll break that down.
Speaker Change: And kind of looking out to two two.
Lucas: 2025, and beyond what would be left.
Speaker Change: In terms of capital expenditures at the end of this year. Thank you very much.
Speaker Change: Yeah, Lucas I'll break that down.
Mark A. Spurbeck: So as we previously announced, the North Guinea side of Century, you know, the historical legacy portion of Century, and that's a total capex of $489 million. $125 million of that has been spent as of 12-31. We have in the budget $150 million for 2024. And that would leave about $200 million for 2025 for the North Guinea side.
Lucas: So as we previously announced the.
Mark A. Spurbeck: The north Daniela.
Mark A. Spurbeck: Historical legacy portion of century, and that's a total capex of $489 million $125 million of that has been spent as of 12 31.
Mark A. Spurbeck: We have in the budget of $150 million for 2024.
Mark A. Spurbeck: And that would leave about $200 million for 2025 for the Newark, and yellow side now the rewards well piece, we look to close that here in the second quarter of this year, we do have $50 million of capital development for with rewards well portion of Syn <unk> in 'twenty 'twenty four.
Jim Grech: Now, the Ward's Well piece, we look to close that here in the second quarter of this year. We do have $50 million of capital development for the Ward's Well portion of Century in 2024. We haven't come up with a full project capex beyond that. We're still in the process of developing an integrated mine plan, and we'll provide that guidance at a later time. And Lucas, I'd like to add to that the CAPEX, the portions of it that are associated with equipment, conveyors, and so on, and miners, have pretty much been spent or ordered, and those costs are known. A large part of what Mark's talking about is the development costs, which get capitalized until we get into production. As far as equipment and being exposed to inflationary pressures, we feel that that's pretty much behind us. And we feel pretty good about those capital numbers because, again, they're mainly associated with development going forward. Very, very helpful. Thank you for that.
Jim Grech: Sure.
Jim Grech: Haven't come up with a full project capex beyond that we're still it's still in the process developing an integrated mine plan and we'll provide that guidance at a later date.
Speaker Change: Lucas I'd like to add to that that the capex.
Jim Grech: Portions of it that are associated with equipment conveyors, and so on and miners.
Jim Grech: It's pretty much been spent there ordered and those costs are known you know a large part of what Mark is talking about is the development costs.
Jim Grech: Would you get capitalized until we get into production. So you know as far as equipment and being exposed inflationary pressures, we feel that that's pretty much behind us.
Jim Grech: We feel pretty good about those capital numbers, because again, it's mainly associated with development going forward.
Jim Grech: Very very helpful. Thank you for that I'll squeeze one last thing then.
Lucas N. Pipes: I'll squeeze one last theme in, that's around your balance sheet and capital return. So it's kind of a three-pronged question. I'll try to be brief. But... Congratulations on the revolver.
Speaker Change: It's around your balance sheet and capital returns.
Lucas N. Pipes:
Speaker Change: So kind of three pronged question I'll try to be brief but.
Speaker Change: <unk> on the revolver, how does that fit into kind of your capital structure going forward does that unlock additional.
Lucas N. Pipes: How does that fit into kind of your capital structure going forward? Does that unlock additional capital return opportunities? And related, how do you think about the amount of cash on your balance sheet today? Is that the right level going forward? Again, it kind of ties into the revolver, of course.
Lucas N. Pipes: Capital return opportunities and related how do you think about kind of cash on your balance sheet today is that.
Lucas N. Pipes: So is that the right level going forward again, it kind of ties into the revolver of course, and then how should we think about net interest income.
Mark A. Spurbeck: And then how should we think about net interest income or expense, given that cash balance? We'd appreciate your, Yeah. All right. So you snuck kind of three questions in there in the last one, Lucas.
Lucas: Ore expense given given that cash balance would appreciate your thoughts on this.
Mark A. Spurbeck: Yeah, Alright, you snuck kind of three questions in there and the last one Lucas.
Lucas N. Pipes: I'm happy to answer those questions, though, and I'll start by just reminding you that everything we've done from a balance sheet perspective over the last two years has addressed the evolving capital markets for our industry, which operates with above average volatility in both demand and market pricing. We will not risk the company's financial strength.
Lucas: Oh happy are happy to answer those questions, though and I'll start and industry mind that you know everything we've done from a balance sheet perspective over the last two years has addressed the evolving capital markets for our industry.
Lucas N. Pipes: Which operates with above average volatility in both demand and market pricing.
Lucas N. Pipes: We will not risk the company's financial strength, and we took an opportunity to solidify our financial resiliency for the inevitable dips in the market with this new revolving credit facility.
Mark A. Spurbeck: And we took an opportunity to solidify our financial resiliency for the inevitable dips in the market with this new revolving credit facility. We think that was particularly prudent during the development phase of Centurion, our premium seaborne mineral coal growth engine. The revolving credit facility does provide an attractive opportunity to utilize it for letters of credit, for surety, and other commercial requirements, something that we would be particularly comfortable doing at a Tier 1 met coal mine with a 20-plus year life. I will add that Moody's did take note, bumped our rating up a notch, and while this financial strength comes at a cost of additional liquidity, we continue to benefit from lower suret So there is a net benefit there in addition to the interest income that you mentioned. We get a safe Treasury-like yield, so at today's market, it's probably 4.5% to 5% is a good marker to use on that cash balance.
Mark A. Spurbeck: That was particularly prudent during the development phase is ensuring a premium seaborne metallurgical coal growth engine.
Mark A. Spurbeck: The revolving credit facility does provide an attractive opportunity to utilize it for letters of credit for surety and other commercial requirements something that we would be particularly comfortable doing at a tier one met coal mine with a 20 plus year life.
Mark A. Spurbeck: I will add that you know Moody's did take note bumped our rating up a notch and.
Mark A. Spurbeck: While this financial strength comes at a cost of our additional liquidity, we continue to benefit from lower surety bonding fees lower FX hedging costs.
Mark A. Spurbeck: As well as lower D&O premium. So there is a there is a net benefit there. In addition to the interest income that you mentioned.
Mark A. Spurbeck: Lately, we get a safe treasury yields though at today's market is probably four 5% to 5% is a good marker to use on those and as cash balances.
Speaker Change: Got it okay.
Mark A. Spurbeck: Got it. Okay, that's helpful. I'll leave it here for now. I appreciate it, and best of luck. Thanks, Lucas.
Speaker Change: That's helpful. I'll leave it here for now I appreciate it and best of luck.
Speaker Change: Thanks, Luke next question please.
Operator: Next question, please. The next question comes from Katya Jasinic of BMO Capital Markets. Please go ahead. Hi, thank you for taking my questions.
Katya Jasinic: Next question comes from Todd Yeah, just cynic of BMO capital markets. Please go ahead.
Katya Jasinic: Hi, Thank you for taking my questions.
Katya Jasinic: First, just to confirm, you expect Show Creek to add 1.5 million tons this year? Yeah, we haven't, we haven't provided guidance on the individual mine levels, but that's in the right ballpark. We had a really good start to the quarter.
Katya Jasinic: First just to confirm you expect show quick kill Al.
Katya Jasinic: Had one 5 million tons this year.
Katya Jasinic: Yeah, we haven't we haven't provided guidance that any individual mine level, but that's in the right ballpark. We are at a really good start to the quarter.
Unnamed Speaker: We probably think production is probably in that. And can you just remind us what the production capacity at Shoal Creek is at this point? That mine has done more than one-and-a-half historically, but given where we're at, you know, in the mine, geological conditions, we're comfortable with those levels. Okay, and then just quickly, you. The major project capex is at $235 million, and I think you mentioned the Centurion is about $150 million. Can you talk a bit about what...
Katya Jasinic: We probably think production is probably in that ballpark.
Unnamed Speaker: And can you just remind us what is the production capacity at Shoal Creek at this point.
Unnamed Speaker: The Max.
Unnamed Speaker: That mine has done more than one and a half historically, but given where we're at in the mine geological conditions.
Unnamed Speaker: We're comfortable at those levels.
Unnamed Speaker: Okay and then just quickly you are the major project Capex is at 230.
Unnamed Speaker: $5 million and I think you mentioned D. Centurion is about 150 million well can you talk a bit about what the.
Mark A. Spurbeck: The rest. That is, what are some of the other projects included in that? Yeah, there's $150 million for the North Canela portion of Century, and there's about $50 million for the Ward's Well portion of that, assuming we get that closed in the second quarter. There's also probably $15-20 million down at the WAMO Open Cut Joint Venture that's run by Glenn Kellow. Okay, thank you very much. Welcome.
Unnamed Speaker: The rest of that is what what are some of the other projects included in that.
Mark A. Spurbeck: Yeah, there's there's there's $150 million for for the North can yellow portion of security and there's about $50 million for the awards well portion of that assuming we get that closed in the second quarter Theres also probably $15 million to $20 million down at the one will open cut joint venture that that were.
Mark A. Spurbeck: Let's run by Glencore.
Mark A. Spurbeck: Okay.
Speaker Change: Okay. Thank you very much.
Speaker Change: Welcome. Thank you.
Operator: Thank you. I think we can take the next question. Oh, I'm sorry, Katya. Did you have more?
Katya Jasinic: And I think we can take the next question Oh, I'm sorry to cut you think you'll have more.
Operator: The next question comes from Nathan Martin of Benchmark. Please go ahead. Thanks, operator. Good morning, everyone.
Operator: The next question comes from Nathan Martin of Benchmark. Please go ahead.
Nathan Martin: Thanks, operator, and good morning, everyone. Thanks for taking my questions.
Nathan Martin: Thanks for taking my questions. We'll start on the seaborne thermal side, guiding 9 to 11 million tons of exports there. What's the approximate production split between the high quality tons, you know, you get the Newcastle-like pricing, and then the higher ash, lower quality product that prices off API2? I know you guys mentioned in your release the split is roughly even on the unpriced tons, but just specifically wondering about production between Guamo and Wopenyong this year. I think Mark you might have mentioned some positive sequencing along the lines there, and then how do you guys see, you know, going forward the overall production levels and quality splits of that segment changing over the next several years, just given some of the extension projects I believe you've talked about you I'll take that first question, and you're right.
Nathan Martin: And he will start on the seaborne thermal side guiding to a nine to 11 million tons of exports there.
Nathan Martin: What's your approximate production split between the high quality tons, you know they get their new Castle Lite pricing and then the higher ash lower quality product that prices on the API. Two I know you guys mentioned in your release split is roughly evenly unpriced tons, but just specifically wondering on production between Guam Owen Wilson you on this this year.
Nathan Martin: Mark you might have mentioned some positive sequencing in the along the lines there and then how do you guys see.
Nathan Martin: Going forward, the overall production levels and quality splits of that.
Nathan Martin: Grid changing over the next several years just given some of the expansion projects I believe George you've talked about you're working on.
Speaker Change: Oh I'll take that first question and you're right, there's some better a better Newcastle spec product this year and on an overall portfolio basis.
Mark A. Spurbeck: There's some better Newcastle spec product this year on an overall portfolio basis, just given the mine sequencing at the open cut. Probably looking somewhere in the neighborhood of 4.5 to 5 million tons of Newcastle spec product, which, as you know, are all exports. Go ahead. Great, Mark.
Speaker Change: Just given the mine sequencing at the open cut.
Speaker Change: Probably looking somewhere in the neighborhood of four five to 5 million tons of Newcastle spec product.
Mark A. Spurbeck: Which as you know are all export tons.
Speaker Change: Go ahead.
Mark A. Spurbeck: And I was just saying, any thoughts on how, you know, the splits in the production levels in that segment will trend over the next couple years, just given some of the projects it looks like you guys are working on? So, we haven't given any guidance beyond 24. I will say that that outlook is fairly stable for the next several years. There are extension projects that are under study.
Speaker Change: Great if I can understand and any thoughts on on how you know the splits and the production levels in that segment trend over the next couple years, just given some of the.
Mark A. Spurbeck: The projects it looks like you guys are working on.
Mark A. Spurbeck: So we haven't given any guidance beyond 24, I will say that the outlook is fairly stable for the next several years. There are extension projects that are under study, we haven't announced anything but as we get further down the road and complete those studies will be updating the market.
Mark A. Spurbeck: We haven't announced anything yet, but as we get further down the road and complete those studies, we'll be updating you. Okay.
Speaker Change: Okay got it maybe maybe over to the met segment quickly.
Nathan Martin: Maybe over to the MET segment quickly. Forecasting a quarter-over-quarter drop in shipments, I think to $1.4 million from $2.1 million in the fourth quarter. Maybe get a little more color on that expected decline. Is it vessel timing? Is it something else?
Nathan Martin: Forecasting our quarter over quarter drop their shipments I think the $1 4 million from $2 one in the fourth quarter.
Nathan Martin: Maybe get a little more color on that expected decline is at the vessel timing is it something else I know Mark you mentioned, you're keeping an eye on the lock outage in demopoulos, those well to any additional thoughts there.
Mark A. Spurbeck: I know, Mark, you mentioned you're keeping an eye on the lockout in Demopolis as well. So any additional thoughts there? Maybe you are investigating any transportation alternatives as that continues? And then, you know, on the cost per ton side, I'm assuming two expected shipments driving that range higher for the first quarter versus the four-year range, but any thoughts on maybe how you expect both those items, segments, shipments, and costs to trend throughout the year? Any other long-wall moves or so to flag?
Mark A. Spurbeck: Maybe are you investigating any transportation alternatives that continues.
Mark A. Spurbeck: And then you know on their cost per ton side I'm, assuming if.
Mark A. Spurbeck: So you expected shipments driving that range higher for the first quarter versus the full year range, but any thoughts on maybe how you expect both those items met segment shipments and cost to trend throughout the year.
Mark A. Spurbeck: Any other longwall moves are so just to flag I think you flagged one in the first quarter.
Mark A. Spurbeck: I think you flagged one in the first quarter. Yeah, I'll start with the volumes, just to address the first quarter. Some of that was covered in my remarks. This is typical, or I should say we've had that we've experienced the last couple of years. Really, there's a long, long move at Metrop that's bringing down some first quarter volumes. And then there's just typical mine sequencing at the CMJV. It did have an absolutely fantastic fourth quarter.
Mark A. Spurbeck: Yeah, I'll start with the the volumes just address the first quarter. Some of that was covered in my remarks that.
Mark A. Spurbeck: This is a typical or I should say we've had we've had that we've experienced the last couple of years.
Mark A. Spurbeck: Really there's a longwall move at Medtronic, that's bringing down some first quarter volumes and then Theres just typical mine sequencing at the <unk>. It did have absolutely fantastic fourth quarter, but just where they're at in the minds and the pinch that there will be a lower production coming in the first quarter.
Jim Grech: But just where they're at in the mines, in the pit, there will be lower production in the first quarter, so it is less than rateable, similar to last year's circumstances. It will increase as we go throughout the year to make up that full balance. And then, Jim, do you want to cover the lock issue? Yeah, Nate, with the lock issue, the timing that we have, and the industry has from the Army Corps of Engineers.
Jim Grech: So it is less than ratable similar to last year our circumstances.
Jim Grech: Well it will increase as we go throughout the year to make up that full balance and then Jim do you want to cover the lock issue.
Jim Grech: Yeah, Nate was the with the lock issue are the timing that we have that industry has from the Army Corps of engineers is for the locks to be back in service sometime had been made that's their current estimate and so in the interim we've made alternate transportation.
Jim Grech: Routes, we've got two different ones ones, all barge and another one is barge and rail that we're putting in place to keep the call moving we don't see that impacting our first quarter volumes or our full year volumes for Shoal Creek sales volumes we.
Jim Grech: We do think there may be a dip in the second quarter, depending on when that lock gets back in place.
Jim Grech: With the sales tons in the second quarter, but again it won't affect the full year.
Speaker Change: Sales numbers or Shoal Creek.
Speaker Change: Very helpful color guys. Thank you and then maybe just one more.
Jim Grech: Looking at the U S thermal business.
Speaker Change: Flag, how low Nat gas prices high stockpiles are are weighing on demand noted a couple of contract buyouts I think so.
Jim Grech: If I look at pure V. In particular, a fantastic year for you guys for that segment I'm guiding to sales that are maybe only down a million or two times I think at the midpoint year over year, obviously, you've already contracted 85 million tonnes. There as well. So maybe can you talk about how conversations are going are going with your utility partners out there or whether or not you feel like there could be.
Jim Grech: Pressure on that number you know eventually just given the current market dynamics, we're seeing.
Mel: Yeah, well, it's Mel.
Jim Grech: That's one.
Speaker Change: Look we're very comfortable with the way that we sold.
Jim Grech: It was so too.
Jim Grech: In terms of the market. This year, we might see the generate has gone to the spot market to a lesser degree I have in previous years, but we're pretty comfortable with their contracted lib and getting that delivered.
Speaker Change: Thanks, Malcolm I appreciate that I'll leave it there very health for everyone. Thank you for your time and information and best of luck in 'twenty four.
Speaker Change: Thank you. Thank you so much the next question please.
Jim Grech: The next question comes from Chris Lasagna of Jefferies. Please go ahead. Thanks.
Speaker Change: Thanks, Operator, Hey, guys. Thanks for taking my question.
Speaker Change: So there's actually a couple of questions around.
Jim Grech: The met coal business and in and around capital allocation. So you have the.
Jim Grech: The ramp up of North Korean yellow, which I assume is going to be premium low vol.
Jim Grech: Product that gets benchmark pricing is that accurate.
Jim Grech: It absolutely is.
Jim Grech: In my opinion.
Jim Grech: And a lot of People's opinion is that this is the Supreme Court.
Jim Grech: Liberal co and most likely.
Jim Grech: At the top level or the premium.
Jim Grech: And is that true over the reserve life of the asset or does the quality degrade over time.
Jim Grech: Well, that's very true as the whole law for the asset.
Speaker Change: Well the words well.
Jim Grech: Reserve addition is the same type of quality.
Jim Grech: So we don't expect any degradation in the quality and all of those as we transfer from the old north can yellow reserves to the words well reserves.
Speaker Change: Same quality, that's very encouraging so.
Jim Grech: The markets are beginning to believe in kind of stronger for longer met coal pricing and you're generating cash flow now you're pivoting to growth in met coal you have fairly substantial organic growth, but would you consider looking at M&A.
Jim Grech: M&A opportunities, particularly in met coal if they were to arise and where it's really the focus now on delivering organic growth projects and continuing with capital returns.
Jim Grech: Yes, Chris our focus is on is on delivering the shareholder returns and the organic growth is always the top of our list because its the least risk you know we have the most control over that.
Jim Grech: And that continues to be our focus.
Speaker Change: Uh huh.
Jim Grech: Internally now as M&A comes along we Opportunistically look at anything that comes our way we always take a look at it Chris now you know how active we are it's a different thing but.
Jim Grech: As things come our way, we take a look at it in and then make a determination if it could benefit our shareholders or not but it's it's down the list organic organic opportunities are at the very top of the list.
Jim Grech: Yeah, what's nice about the buyback because you're basically increasing your production on a per share basis at a low valuation and as you're ramping up your met coal volumes and reducing your share count.
Jim Grech: The leverage to the met coal market, obviously becomes much greater so we just an observation we definitely like that and good luck with it all and thanks for taking my questions.
Jim Grech: Thank you Chris that's exact same observation we have to do.
Speaker Change: So your comments I think we can take the next question.
Jim Grech: The next question comes from Michael Dudas of vertical Research partners. Please go ahead.
Jim Grech: Good morning, Carla gentlemen.
Jim Grech: Good morning morning.
Jim Grech: Hum.
Jim Grech: Two questions first on U S thermal.
Jim Grech: Thermal U S. Jimmy you mentioned about some and we've seen in the market some coal plants closures being deferred.
Jim Grech: Given the dynamics on grid and reliability et cetera, maybe you could share with us like relative to maybe 612 months ago and how you're looking at your customer base and has there been any major changes on over the next several years or maybe even sooner the retirement on on your customers and where are you selling the coal is that change that maybe able to lengthen.
Jim Grech: The opportunity to monetize your reserves are in the in the U S. Just wanted to get felt about that.
Speaker Change: Hey, Mike.
Jim Grech: The you know the discussions we have with our customers.
Jim Grech: <unk> is one of the things that we've noticed is now desires to have longer term contracts put in place.
Jim Grech: Because of the combination of the concern about the reliability of supply and the potential for plants are having longer lives than was originally thought to be the case.
Jim Grech: And I would say that the conversations we're having with our customers and what we're seeing is plant that maybe we're going to close in the next few years looking at him going out to 29 or 30. It's you know, it's not a nobody's making commitments or <unk>.
Jim Grech: Addictions beyond that but it is a very good trend to see that see that occurring and again, Mike as I'm sure. You know you know the issue is reliability rate the reliability of the grid backed up by base load power.
Jim Grech: The need to keep these plants are around to do that so it's an encouraging start.
Jim Grech: You know getting it's getting us through stronger through the end of this decade, and well see where it leads to from there.
Speaker Change: Oh I appreciate those thoughts secondly.
Jim Grech: Mobile market intelligence on your part as you look out maybe to the second half of this year.
Jim Grech: Do you think there's a better chance for the thermal markets to recover nicely or see pressure on the seaborne met side.
Jim Grech: Given where fundamentals fundamentals I agree with Chris is thought about the shortage the scarcity of met coal, but how are you thinking given what youre seeing in <unk> relative to of course, the high inventories in gas prices, how that plays through with on the supply side and such are four should move over the next 612 months.
Jim Grech: Yeah, Mike before we answered so I'll make sure. We got the question question clear are you talking about seaborne thermal and seaborne met and they have to play out.
Speaker Change: Yes. Thank you.
Jim Grech: Yes sure.
Jim Grech: I'll take that when it comes to the seaborne met market.
Jim Grech: Yes.
Jim Grech: We are quite encouraged by what we see what we saw during Q4, we increased crude steel production rights outside of China, and we expect those rates to continue during during Q1 and into Q2.
Speaker Change: And we also are encouraged in the mid <unk> co Spice boy.
Jim Grech: Very constrained supply so supply hasnt gone back to those 2019 levels, which we use as a bit of Iceland.
Jim Grech: To look at that and we still see supply challenge moving through 2024.
Jim Grech: Turning to thermal coal.
Speaker Change: Newcastle coal please.
Jim Grech: Yeah.
Jim Grech: Eugene.
Jim Grech: Solid demand however at times, we get a little ahead of the demand so where we sit right now with prices around $120.
Jim Grech: We think that supply is a little bit hazy headquarter strong supply growth out of out of East Coast, Australia in Q4, but we think the prospects for Newcastle thermal coal and that's the cohort that we really put it into the export market improve as we move through the year.
Jim Grech: Yes.
Jim Grech: Inventories to be taken down in the northern hemisphere. So again.
Speaker Change: We are optimistic about the rest of the year.
Speaker Change: Excellent. Thank you very much.
Speaker Change: Thank you operator do we have another question.
Jim Grech: The next question is a follow up from Lucas pipes of B Riley Securities. Please go ahead. Thank you very much operator. Thank you very much for taking my follow up question.
Speaker Change: My first one is on welcoming young I looked at the technical report some time ago. It that's last year's Technical report I believe it had showed kind of lower volume starting.
Jim Grech: This year.
Jim Grech: Yes.
Speaker Change: I Wonder if you could maybe comment on that I guess, we'll get an updated version with the 10-K, but if you could maybe comment on kind of mine of life, a whopping young and your outlook on production for this year and the coming years and then.
Jim Grech: I guess you'd have to kind of net that against what goes.
Jim Grech: Domestic versus exports. So if you could comment on that and kind of the net contribution of warping young tier seaborne thermal portfolio.
Speaker Change: Overtime I would really appreciate the color. Thank you.
Jim Grech: Yeah, Lucas will start up what Malcolm talk about the you know the contracting of the domestic versus export and some color on that.
Jim Grech: To the extent that we can talk about that.
Jim Grech: And then.
Jim Grech: And then we'll follow up with your question about the reserves and the outlook. So Malcolm if you could go for it.
Jim Grech: Yes.
Jim Grech: As we move past 'twenty 'twenty 2027, 2020, the proportion of export coal we.
Jim Grech: Expect to increase.
Speaker Change: They're awesome.
Speaker Change: Stinker options in.
Jim Grech: And production options to increase.
Jim Grech: Beyond that as well syndrome, which we can yes.
Jim Grech: But a very busy drilling program there.
Jim Grech: Year over year, we're probably looking at.
Jim Grech: Oh, it's only about three or 400000 tonnes lighter at 24 versus 23.
Jim Grech: So in this market.
Jim Grech: And I would say the export volumes are probably similar year over year as well so pretty consistent performance there and obviously, we already mentioned the better performance out of the light bulb.
Speaker Change: Increasing the proportion of new guests.
Jim Grech: Got it and should I think about kind of the higher output versus the prior planets as efficiency gains.
Jim Grech: And then I would anticipate it.
Jim Grech: Kind of optimization opportunities, how should I think about that.
Jim Grech: Yes, I think it's a combination of both of those things Lucas.
Speaker Change: We continue to mine at various looking.
Jim Grech: Looking forward going out.
Jim Grech: Beyond 24, certainly Theres studies, we talked about that earlier that we are we are conducting theirs.
Jim Grech: Several expansion opportunities and we'll continue to study those.
Jim Grech: And when we get further down the line Youll see an updated production profile.
Jim Grech: Technical report.
Jim Grech: Hum.
Speaker Change: Maybe also you talked you know wambold.
Jim Grech: Underground would come out of that longwall move at the end of last year and had the longwall running this year two I'm not sure what timeframe you were talking about with the tonnage profile.
Jim Grech: Okay.
Speaker Change: Yes that was that was kind of well being young over the next.
Jim Grech: A couple of years.
Jim Grech: Yep.
Jim Grech: Yes.
Speaker Change: Very very helpful. I appreciate that discussion I guess some helpful context.
Jim Grech: A follow up on worthwhile I think earlier, you mentioned $50 million of capital.
Jim Grech: This year.
Jim Grech: Wondering if you could maybe expand on.
Jim Grech: What.
Jim Grech: You would envision to invest in with that capital is it is it machines visit.
Jim Grech: Infrastructure for the eventual.
Jim Grech: Extraction of those reserves.
Jim Grech: Would appreciate your comments on that.
Jim Grech: Yeah, I think it's a combination of both Lukas I mean there'll be some certainly will begin driving an underground development towards those reserves, which is all capitalized so thats the preliminary estimate 50 million for 2024.
Speaker Change: Okay. That's helpful and then.
Jim Grech:
Jim Grech: On the domestic side.
Jim Grech: Wanted to kind of ask about your contract portfolio beyond this year.
Jim Grech: Can you can you frame up kind of where where the book stands as a percentage off of them.
Jim Grech: This year's production for 2025.
Jim Grech: And ballpark, what sort of pricing direction should we anticipate.
Jim Grech: Yeah.
Jim Grech: Lucas for 2025, our domestic book right now if we look at the P. R. B.
Jim Grech: We gauge it against the midpoint of the guidance this year were better than 60% committed.
Jim Grech: And on the other U S thermal same way if you look at the midpoint of guidance. This year when you take that to 2025 or about 75% committed.
Jim Grech: And we have not yet issued any outlook on pricing for 2025.
Speaker Change: Alright, I appreciate it very much again best of luck.
Jim Grech: Thank you Lucas Thank you Lucas.
Jim Grech: This concludes our question and answer session I would like to turn the conference back over to Jim Greg for any closing remarks.
Speaker Change: Well. Thank you all for joining us today, I'd, especially like to thank our employees for remaining focused on safety and for continuing to execute on our various initiatives.
Jim Grech: I'd also like to thank our investors customers and vendors for your continued support.
Speaker Change: Operator that concludes our call.
Jim Grech: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Jim Grech: [music].
Jim Grech: Right.
Jim Grech: [music].