Hallador Energy (HNRG) 16 Aug 222022 Q2 Earnings call transcript

Thank you for standing by and welcome to the Hallador Second Quarter 2022 Earnings Call. My name is Sam and I will be your moderator for today’s call. [Operator Instructions] I now like to hand the call over to Rebecca Palumbo, Investor Relations. Rebecca?

Thank you, Sam, and thank you everybody for taking the time to join us today. our XX-Q XXXX on that released results and our we Form on is afternoon, second financial quarter operating website. Yesterday now posted our Larry today and me on call Brent With this CEO; our Martin, Bilsland, and CFO. is President will After available your to be our our answer remarks, prepared team questions.

financial contain statements future future, Before events. not please may In the often are expected that performance. this discussion that begin, statements and statements forward-looking address past business our we today context, note forward-looking related to

forward-looking more or these underlying one or currently projected results based available to information expected. we While those actual our or statements on of may are us, if from vary assumptions incorrect, if uncertainties or prove risks materially these materialize

sales, remarks, or a providing be legislation and For law. events, our whether forward-looking information, example, regulations. future we publicly otherwise update no or future these obligation revise to any of new as statements may estimates of result costs by have In required binding

of some in the and should the factors time-to-time from a future uncertainties described see we the For file you our affect of SEC. reports with results, discussion may risk that risks those

As a recorded. is reminder, call this being conference

earnings a during website. archived and addition, at is ask webcast Hallador's In available also our on We this to live you encourage call questions Q&A.

the The free toll number If to ask access would the conference. XXXXXX. to on and you a are need like is webcast into question, you dial will code XXX-XXX-XXXX,

over I'll to call turn that, the Now with Larry.

plus loss capital, on less of the working share. cash retirement net cash current our quarter reclamation, tax quarter I started, define a $X.X amortization. of get We you, bank effects as adjusted to Becky, afternoon, the plus before and flows And obligations, subsidiaries $X.XX income for Thank interest operating I or results. a we’re plus good period less Today operating investments, other method plus paid of second million and expense, equity certain had asset effects everyone. changes, want reporting EBITDA

or $X.XX million $X.X was loss a year-to-date Our share.

debt was million year, Our the $XX.X the and the for quarter EBITDA by $XX.X million $XX.X for for quarter, million our for year. million the adjusted increased we and $XX

million. bank June Our at was XX debt $XXX.X

Our now X.XXx. call our our ratio, the to leverage over million will CEO, was I adjusted debt was debt EBITDA turn Brent net to which $XXX.X and Bilsland. is

our events, to and quarter, current the a Larry. per you, second million financial exceeded sales for and next add few In our cost historical approvals. over levels. progress third and we Merom We cost prices. forward the accomplishments significant our $XX to three liquidity prices the returning the successful the ton, adding in expectations. our our future Thank Also power pending plant increasing in these liquidity. our X.X our of quarter, dramatically sales during future months, of raising structure, greatly over We're to improved to total million All closing structure made $XXX acquisition increasing towards second position. contracted and sales We our tons governmental were of operating the our successful of quarter financial lowering within

sales for results, QX lowest an expected to is $XX.XX. operating shipped years. and lower per X.X to million look our were the price quarter than at next we ton price As average tons sales be during $X.XX several quarter was This of the

significantly for dramatically ton majority ton the production per $X.XX As accounting This represents in costs and mine more QX an that $XX.XX. increase the per over QX. were $X we year. the third experience cost the improvement. quarter, improved of next will Productivity than roughly decrease fourth at a

to and in inventory, increases on the parts $X.X During operating was flow supplies, receivable, second and ARO cash negative quarter, spent due cash our reclamation. accounts million,

third ratio convertible Liquidity of XX of XX.X increase the $XX covenant increased Our a converted was with million. $XX million company and compliance in total the convertible executing covenants. $XX the quarter all came an notes successful fully at million X.XXx. We million. quarter. we XX were at footing and equaling notes June liquidity, the second quarter, in with QX. better project debt ourselves covenant financial our our XXX.X of to during as additional in leverage in second by our of by stood million modifying an convertible was in of to notes put banks our issued during To and which million, debt $X being The amendment equity service bank debt-to-EBITDA million future followed for

coal in new were contracts executing second successful for and in our XXXX, time the will quarter, sales XXXX, the XXXX excess a ton XXXX These sales forward improve prices dramatically for prices. contracts, third average averaging frame. During we and $XXX of

third. If year, the bit In that fourth the we first this at expect to at we you we ton. last little per a price than our towards sales the half of weighted heavily this increase we XXXX, more averaged of at look $XX average half per quarter have ton. year, the When average look $XX expect per expect $XX.XX price ton, to be to be

up the effect than triple XXXX Oaktown our the of we to to XX% Merom use as we will valuable more margins call, at most those earnings in plant, going discussed was plan had that our our that prior this production tons of felt of forward. So, In power taking our time.

those it the disclosing used market majority changed felt tons and after third-party customers. was to plans, to we soon However, sell better conditions those of significantly

close transaction. is of the this once the prime example think a Merom will plant the optionality power we us I afford on

Merom the You which well. from be, party in willing limited. but showed, profit third that's in execute in know, million to XXXX to we XXXX. majority will allow like expect we just we're and very use willing adjusted as contracts the is plant, are of feel that plant than on XXX as pay it if the Hallador time best we where to still we'll generate of XXXX at worth plan I think the These Merom them, take customers little more of tons, EBITDA is if And the

project that net we end will we free However, so year. the be the that cash flow next of before great will be debt

excited very limitations, alleviate EBITDA. If further to we're there's XXXX we're Merom’s upside about able adjusted fuel So, Hallador’s that. to

government we will months, made regulatory the the Looking towards acquisition financial great financial of at attaining the front. the in feel closing subject the progress our acquisition, both closing and we've closing couple approvals. the next We Merom anticipate on to final and of occur

our [ph] one. the more We've have excited perform about to been transition operating on [Aces] our team, partner to for a it should in never day ensure thrilled Merom we partner Our successful energy Hallador. CAMS, hard opportunity power worked very in sales all the are as We're new solid and look feel Hallador future ground We of our brings plant contracts. and forward Merom of shareholders. to comfortable we on its the promising that financially.

comments. up that, the questions and for line with I'll So, open

you. Thank now Instructions] Our the comes Securities. line with [Operator your Pipes from line first of is Lucas Riley open. question Lucas, B.

Giles This does question and on EBITDA asking hi. the volume respectively? What is XXX a Yes, Lucas. of cost behalf Nick of assume million for

name. didn't I'm your catch sorry, I

question Lucas. Nick is Hi. Yeah. How's asking This a it on of going? behalf Giles,

out we're let that you number that next we've Larry, don't that I a pit higher I forward that misspeak I'll of year little is Alright. on on going as, the know want reported Thanks. fill bringing additional some surface to cost. in. cost. the Larry, production And

and the $XX fourth well to in next for $XX $XX quarter year

Got it.

helpful. Okay. of million, it plant transaction the follow-up close power acquisition? or there, to is does does independent And at XXX That's then the require the Merom to it

independent. That's

the little very out we tons profit for unless expect said, to working As able we've are the of which on. we planet, we are secure additional plant

successful if $XXX then million. So, the there's tons securing we potential to beyond profit year, in additional for XXXX are the just upside

great. Great,

to that clear. Do any for in to million equipment, target? one for Thanks hiring color. infrastructure make me. think any then Okay, I to get mine And $XXX you that need investments labor that's last

think – great hiring front. had now made we've the That's XXXX those. we I And XXX our we've about in count, progress September We've think plus I of that of struggled an goal that we've a employees. area last on XXX plan of additional started an since initial added hiring

we're at. that So, our – we want to number almost target the to be

equipment on I take no back. the the our far have, – equipment that front, well, As we have as we

we've company this – next to the have We a pit Freelandville, And XXX,XXX surface Indiana. to bit in in year. roughly reopen for little a of of of – the out CapEx added to for some bring fourth of added about quarter and balance year that to pit tons equipment surface that basically

well. at seeing, know, you coal little levels that And of. bit turn to we're quite we're seeing prices that unheard frankly just of So, a as are

range $XX $XXX, why coal. a those you of is And justify because cost our surface bringing as cost over expensive jumping a higher is million sell, which to X into of But work. little we've up north the margins tons so, bit we're showing said, it when can ton, mining on production,

prices prices gas strong. have strong. So, stayed stayed have European

I I saw August as that's to as flow tight. keeps that happening, market Europe see hour. power a U.S. $XXX of going price Europe in you're long a think, going coal pretty next for I our mean, megawatt and to to keep

fired an capacity is all just power all really years from extension went of find, hard right, almost to in past of a three, now to limit prices couple coal is on had name backyard saying, that lot because we're to legal retire. a more I going seeing, extended in can we're which to have why auction. put of plants this and know, our that plants So, capacity nothing these you kind announced

capacity three and we're is high elevated. prices power plant elevated next keep see So, keeping see seeing years, for really still announced, Europe, going We more in tight which and We prices pretty also gas the natural to is still still retirements prices. which disruption

So, for as being coal both of we're plant, that feeling company about the Hallador’s addition profit And things the transaction good excited with good Merom are here tremendously those we're able just which business. future about all the power shortly. getting closed our to and of of

detail appreciate Got the helpful. numbers last mentioned? there. put it. CapEx would the guess that one incremental be, you – Really one around I do can have you just That's very some all you

I'll too, don't to misquote Larry the I Yes. number. prefer here so

Yes.

the mine I X.X CapEx incremental surface think So, for is million. the about

appreciate all Got the on it. really the best and progress and continue it. far Got congrats color so of luck. Well,

Thank you, Nick.

Moran line the with The from Nick. John, & open. Thank comes John of your you, is question Robotti line Company. next

Hi, during quarter. – that X.X Brent. a the had on million you tons Thank you. I the sold

play portions references from of a how all that customers of away to on the sales increase or that that these – tonnage, ability in collapses year, your next For walk of come the sold? contracted these on price you new - example, tons? coal if tons into disclosure those can of subject much have You that would XX-Qs customers options how or forward tonnage reduce

are the The those million no volumes. plus tons X.X minus I referenced; on tons. fixed There's

that's and So, fixed to that? ability a price no out of get

Correct.

place those on XXXX What guess, How if volumes in – much contracts XXXX any? about new stale to that of prior I would be these call, this subject to to the at, I volumes? pricing, what increasing were

is that volume Anything pricing some XXXX we that million – in XXXX, We sales, of some So, of We I X.X XXXX, have in commitments. on look timeframe we said, here, not have successful but was commitments, X wasn't The let tons what, ton, think, unpriced, legacy selling beyond I through Yeah. were like XXXX out XXXX, XXXX. up. XXXX million timeframe. legacy? hang in disclosed, me do the it XXXX, that the so

up. So, come you would those see pricing

Okay.

to can or XXX,XXX. XXX,XXX or that of by XXX,XXX down – maybe million up And XXX,XXX X go is

of And the of the – or either it's it's Okay. rest fixed? rest either unpriced

Correct.

to but, assuming year? great. assume next so that Merom, information that of And just have I question so must closes fuel they a will you look You that about you it, is limited, know – then where third-party don't I what can public. like expect, with said, producers. as say contracts you're some Okay, find

available So, year. is I coal next there no guess for

So, say… can you

that, versus again to I you we've at price you this it, John, these you call saw plant. know, that couple but fuel profit, we do us it were our capacity think plant prices, electrons, dedicated higher And wouldn't it the if a on on last why at we above some you take with that factors. think will – That fuel but and sell guy expectations. run there's nights been – run, offer to at said generating is you the – purchase a an to expect will that [indiscernible] be set It make to a will pricing for low there price coal was, the them I it that? small that plant who was can hey, later, know,

do that. So, we just to made decision the

the a took couple you instead it of we to the plant, taking, so, to million tons And know, market.

fuel I for So, it's said, not plant, there's fuel no just like the limited. it's that

hours, not finalized. run not some tons acquire it's to see to going plant, but So, additional to the a deals are to opportunities bring we lot of those do

And until happen so, we'll they assume not do. to they're going

Yeah. I [Multiple decision. Speakers] mean that

EBITDA. All we we've wanted traditionally of out $XX million really point to been was about

We months. all now pay and at EBITDA, had business the in that for next, call off enough the million numbers we're generate expecting, about are our to we the our of XX here will generate talking fully flow prices almost think let's that tripled will it debt, contracted cost XXXX production basically adjusted $XXX that and which we just of we're cash

sense. just figure at XX% will make just of or know like the a I the decision from that capacity you breakeven bit Merom little of if I and So, in for running I out, as it the example, was standpoint economics like lot plant make to don't a – look trying that well. be think money seem what

say… can you I – So, or

correct. of ran the healthy. the quarter did are others, that capacity extremely quarter. before are in released are will the not at pretty so a if plant, we it's little in plant All closing. I'll of There's more why We fuel upside It's run the at day, there's in any it end successful healthy. parts it low right? very of than harder projections, you finding Merom economics and that prices But we haven't to a the the than as for to the third our tell to do going Capacity on the years run gets run it prices first more confusing still factor. will is, Power

little the all and $XXX potential for timeframe. million to in company. of about to pay bank EBITDA. do market going this going it's of of reasons, off talking you're of over those a about cap so, company And a has we're a excited debt And that million $XXX that $XXX It's million

punching I our think weight. that's above

on think right. directors little terms. wanted the price decent dilution, company hit and Thanks lot. in the a the complement to don't a seems raise. it's like a over also just All reasonable but anybody capital and like I it I XX%

what So, anyway worth. you. it's for Thank

John. appreciate I Well, you, that. Thank

John. [Operator Thank you, Instructions] Okay.

[Robert Baker] a We Robert? have Private a question Investor. from [ph],

that priced know my questions. I Yeah. well, XXX, I was, short? a Hi. about taking context XXX give as, first trying the Thank you the that kind one, was far is in you curious Was appreciated? market it you who overall my for you was at lock X.X provide anything tons customer any more is around or of, pricing currently can million a to tons where can extremely as be Just that, on would at? to

Well, transacted we actually separate five with customers.

you in XXXX, and know, seeing are we're generally in get in more is in know, pausing is, bit, valuable prices XXXX XXXX You XXXX. utilities RFP, you market valuable they're backward What more coal into meaning October, see that, to is coal dated, know, little and the buying RFP I is, a out are. from market go September, where think, here the for going than

out quarter. fourth performance trying another like get It's be trying actually everything think scheduled get on but has the reasonably to little in the one shipped, shipped. thing typically about moves with there thus would is [ph] other to go has that that third what tons. it's people job than a I XX% decent I a say have railroad transportation export. are to buy and going to some our done I we of them and to simpler us of to a [CSX] we're handle far. been thing mean,

and high As out we gas think happens, gas, up further. further as keeps is power pricing, further. basically keep adjust further that And extending price gas seeing we that priced and

we happen. pricing out higher So, what it'll curve think push is to will

don't long whatever meaning got coal altercation, BPUs. largest enormous is to that know, the And had As the know, those is We've flowing and we leave and won't seen has States Russia to take United LNG as to those But is GPUs there want Russia's getting long several a you natural aren't or I you largest saying, and Europe States. the Again, those from disruption and Europe and contracts saying then so, disruption and now in it, the that go the United because take market. is been signed tight to in for those States, that as coal. Europe call term saying again, market, contracts? Europe's gas exporter exporter amount of The which you've Russia activity is enormous created countries. we the kind not. from is third then, United Ukraine's, – a So market, Europe a removes a world. lot being the won't an other saying, basically or BTUs contracts gas just of the in to we There's of new of gas XX-year competitor is world. Yes.

through into depending our really doubled came which six or we've kind legacy contracts of environment of with is five you're cheap And period, gone this years, gas where what we've, where this tripled seven years of timeframe has now price the So, gas. entered from at. looking years,

see the to has, lid It those you're going kept happen. isn't hasn't dramatic U.S. to of seen market just It's the a to there and hire been a double. then that response been nobody's been coal more in to coal supply putting hard minds. of not production to capital. its get reasons from to hasn't that, supply response kind hard electrons on, due It's dramatic some of because we've So, really new been coal, looks get from production people. and going All

coal future. XXXs. we've the excited the perspective, that from magical a versus have experience. coal mid-XXs seen the never about seeing pricing It's we're We're quite So, selling in and frankly before. that versus selling in

have is but out hard, but don't of there's to it's You very Transportation to it much at. all pricing where show it, [tell] charts there is all sorts [ph] of moving. trading

And long we the gas out continue to we're so, as going in think as market, push the see disruption curve. long pricing as there's to and as

it's – stay don't Your as it prices High ton? secure but soon. to above as don't we back $XXX think will mine. good XXs prices, anytime see a guess tend to Now, high is we going

we're up of around we year, average with – to to company flow that. lot So, a with cash think next we margins price $XX that prices us. of for to and our now produce we at that average that. of a the seeing moves addition matter, $XX plant. make thing beneficial transaction our see We That's forward looking a hell to a of opportunity, getting that And behind just lot particularly great we're very the

next if you was be Thanks. transport doing of CSX kind one Great. that? mention when could of yeah, My could it bit logistics. on know, XX%, elaborate yes, them was and I mentioned you the of by activity, answer in detail kind question, of delayed or started didn't particular more in wondering on you it's that QX you or the all the about just all tons elaboration XXXX already to delivery any where there a line or rail little

transportation at or maximum. running forms truck, CSX, struggling, NS, whether all of everybody's that their I that think are

customer's but coal, So, responsibility you to freight the deliver us. coal. produce our know, it's to we We sell the the

load a they load So, we transportation effectively we it, have once transfers when sale. that's that's and when title made the once provide, we

and railroad of pretty I've they COVID, is diligent with saying So, things as up, with out make press get just they've flowing perform customers, working usually I'm hiring They've is railroads been the make we little CSX, trucking product lot once what we're to is, sure to we our they well. sure get one to our performance. have that partners there companies to but time take a to be have. struggled that people found that of of the struggled the on with poor primarily, there's going, and a to wound

that standpoint, seen easier months. say, to aren't? you know, reasonable the experienced have a little from front there. and we're don't our hire We gotten would others it's made we've a that here, I our success on last two in but gains know, really people I is

we we're is So, something about on. keeping anyhow, this an good It feel at eye transportation point.

Okay. Thanks.

clear, our customers any every our be when mean all of we to We have delays. to said tons, just of to get mean some all single XXX% a delayed. And of didn't all We didn't ton delays. met contracts could we could our –

No. No.

wasn't – interpreted as Okay. XXX%. Yeah. didn't a I I

Just said, yes.

I X.X to want if to You well, I wasn't million could have, to sure the potentially if know, would wasn't how quite yeah, it or delivery was of, it [indiscernible]? tons all referring guess sure tons – just was I specific I

– percentage but a any having now. customer, all transportation every be deliver is mean, There is ton we just could I that Yeah. delayed, it's not issues said, of it's Brent as

customer a some it could we doing have and this up have any carryover So, are year. better. They delays lot or picking

Okay. That's needs. regarding And another good. labor Alright. question

XXX was, to it was able hire employees, about wanted the had for right, hiring to XXX to that hire from have I hope have and asked for a you Oaktown clarify, do you [ph] that just that XXX of to been think name you I And I [of] XXX had separate Prosperity needed Freelandville? the it. and and Nick mentioned you I

That's correct.

to that, we at We've think like XXX XXX add I something Oaktown. of that. XXX, want done about

scale much to Oaktown, not you we but give on more be and try – at of, comfortable to with hiring just need where front. we’re quite getting to the So, we're

know, with employees. higher we've much hires have turnover had with than new you we historical Now,

to people that that. We're work something left try starting or car manufacturer try those. back, company, starting a some people I think have see at we to are [indiscernible] experience see you to to come like

fence. greater of So, people on of the those some isn't you side that, found the grass you know, the on have other know, the

know efficient So, are when they are that, very is back, people up. they've know, and show which you Correct. drill Those come the great.

got people think it surface mines, We with we're [ph] Freelandville. Prosperity [Ace] down but winding at to winding so Prosperity this and way, hiring I will both you out that, we're the and it some up mines and mean, about be associated as

some those it's be undergrounders. than Ace much to We will some of new easier people will people of hires. hire and miners So, be those from found moved surface

experienced over Where So, to with last has we've any really trouble struggled hire the that. keep haven't we them. year been and undergrounders

you I in then Okay. question, free was of the being of what year, or, you flow net And, terms XXXX, do any, thoughts in Alright. know, point leverage possibility the know, or has as to cash so at And I buybacks as you comes wondering, you some understand. what dividends last debt I down? mentioned with regarding board of that mean, know…? progresses or either throughout forth the

Yeah.

at in the what Board next or year does [ph]. to opportunities our [buying other be that can the there. make that raising I But address we're get we'll far where those as to that it investment time. us, surprises to date, And the stock? closure there's Those buy opportunities We enough of want or our sense we all this think additional to to year as we've liquidity money high no bring behind we'll sure room sure at see juncture, the acquired lay the are priced contracts. and been mode make at not out stock] Merom have make this plans next to the there plant are are get things with plant for in

Thanks Okay. my questions. for it. Appreciate Yeah. answering Very great.

you. Thank

remarks. That hand Instructions] [Operator call Baker. back our session Mr. the you, additional for I'll concludes Okay. for Brent or to Q&A concluding any Thank today.

all Thank time you for we've forward things executing laid look everybody today. we your and the on out to

you we'll quarter. again, So, next and to thanks talk

earnings all XXXX concludes participation. your second That the for quarter you Thank Hallador call.

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