Author Topic: FELP - Foresight Energy  (Read 288956 times)

newbee

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Re: FELP - Foresight Energy
« Reply #1090 on: August 07, 2019, 08:16:57 PM »


Ismael

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Re: FELP - Foresight Energy
« Reply #1091 on: September 07, 2019, 11:56:48 AM »
Q2 Conference Call

Rob Moore
No, no. We are working toward a plan that would allow us to potentially resume longwall mining operations at Hillsboro. Although we're going to be as I've said before, strategic about how we do that and when we do that.

Rob Moore
Well, we are being we're pretty successful right now in terms of taking RFPs that are out there. And we continue to push our product into markets that we haven't been in historically, and we are seeing success there. So, as I've told people with these assets that we have, we can compete against every other basin out there. And with where we're able to produce, that gives us a benefit in terms of getting our coal into the plants if these export markets aren't there, then, we're poised to take domestic share and that's what we're going to do.

Rob Moore
Sure. Sure. I think that as I said earlier, I think all basins could benefit from strategic combinations, whether it be through merger in the traditional form or through JV opportunities. And I think there are more entities that are evaluating and considering, those types of transactions. I think people recognize that there is benefit to those types of combinations. So, we're not actively engaged in any discussions, but it's something that, I think, as an industry people are looking at more frequently than they have in the past, and we'll see what transpires over the next three months to 12 months. But, I would expect to see some additional consolidation in the space.

Robís comments make me skeptical we can count on FELP investing in Longwall ops in Hillsboro unless we see better prices, but it also sounds like they are comfortable taking domestic market share with the capacity they currently have and are open to strategic combinations.  This seems mispriced.  There is a good amount of risk here, but it wouldnít take too much of an improvement in the market outlook for this to be a 10 bagger +. 

roark33

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Re: FELP - Foresight Energy
« Reply #1092 on: September 07, 2019, 12:07:25 PM »
Well, it was a 10 bagger before and then lost 90% of its value, so what is that called?  Not a great investment idea? 

Ismael

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Re: FELP - Foresight Energy
« Reply #1093 on: September 07, 2019, 03:27:01 PM »
@roak33 Sooo your investment idea is to only invest in stocks that go up?

There has been a lot of volatility over the last few years with this one for sure.  FELP has a tremendous amount of leverage that is driving this. 

If pricing continues to deteriorate then this FELP will be a zero, but there are a number of scenarios that can really juice this stock by unlocking value through refinancing or getting Hillsboro up and running.  International price increases due to all the coal fired power plants that are being built around the world or global trade picking up would be a nice tailwind.  Likewise, an increase in natural gas pricing in the US or a trump reelection could do a lot to help ILB pricing.  You could also see some sort of strategic combination that could unlock value. 

The prospective returns for FELP look very asymmetric to me.  I wish I could find a handful of options like this one that have minimal correlation to one another.  I guess it is only a good investment if it goes up though...

John Hjorth

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Re: FELP - Foresight Energy
« Reply #1094 on: September 07, 2019, 04:06:33 PM »
@roak33 Sooo your investment idea is to only invest in stocks that go up?

There has been a lot of volatility over the last few years with this one for sure.  FELP has a tremendous amount of leverage that is driving this. 

If pricing continues to deteriorate then this FELP will be a zero, but there are a number of scenarios that can really juice this stock by unlocking value through refinancing or getting Hillsboro up and running.  International price increases due to all the coal fired power plants that are being built around the world or global trade picking up would be a nice tailwind.  Likewise, an increase in natural gas pricing in the US or a trump reelection could do a lot to help ILB pricing.  You could also see some sort of strategic combination that could unlock value. 

The prospective returns for FELP look very asymmetric to me.  I wish I could find a handful of options like this one that have minimal correlation to one another.  I guess it is only a good investment if it goes up though...

Ismael,

You wrote it yourself, ref. my emphasis above. How much of your capital are you willing to put on the line here for this venture? To me, this is a doughnut long term. To me, this company does not have a long term future. It's now 3Ĺ years [and ~110 pages here on CoBF] ago Picasso started this topic, based on a situational deep value proposition, however a totally different one than how FELP looks like today. [And naturally also Picasso has moved on.] Those longs who got it right in the first place got a good shot of Fentanyl, the rest for the longs has since then just been a long aile of suffering.

I'm not trying to be condescending here, knowingly it will always read so. If you have no real conviction here, why even pest your own existence with some piece of crap where you have to think about getting out every day instead of taking it easy [and making money]?
« Last Edit: September 07, 2019, 05:27:30 PM by John Hjorth »
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Ismael

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Re: FELP - Foresight Energy
« Reply #1095 on: September 08, 2019, 11:43:14 AM »
@John Hjorth, there are lots of different investment styles and ways to make money, it sounds like this type of investment doesnít jive with your style which is fine. 
The industry is in cyclical decline in the US, however, it is going to be a significant part of the US energy makeup for decades to come and coal power plants are being built in developing countries at a faster rate than they are getting decommissioned in developed countries.  FELPs mines are at the bottom of the US cost curve so they should be throwing off lots of cash flow for many years to come.  It isnít entirely certain these cash flows will flow to the current equity holders, however, I can envision plausible outcomes where they do.  The market doesnít seem to be pricing these positive scenarios into the stock.  I appreciate confirming or disconfirming analysis on this point, but was hoping for better feedback than the companyís message board is 100 pages long and the stock price is volatile so it must be going bankrupt.   
Iíve been following this situation closely since Picasso brought it to the board and think it is interesting again at this price.  The assets havenít changed, however, the control issue from 2016 is resolved, Hillsboro is no longer on fire and there is the real possibility of reopening it, and the coal price environment is better now than then.  Why is it selling for a third of the price as it was in 2016?  Thanks!

RadMan24

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Re: FELP - Foresight Energy
« Reply #1096 on: September 08, 2019, 04:23:12 PM »
@John Hjorth, there are lots of different investment styles and ways to make money, it sounds like this type of investment doesnít jive with your style which is fine. 
The industry is in cyclical decline in the US, however, it is going to be a significant part of the US energy makeup for decades to come and coal power plants are being built in developing countries at a faster rate than they are getting decommissioned in developed countries.  FELPs mines are at the bottom of the US cost curve so they should be throwing off lots of cash flow for many years to come.  It isnít entirely certain these cash flows will flow to the current equity holders, however, I can envision plausible outcomes where they do.  The market doesnít seem to be pricing these positive scenarios into the stock.  I appreciate confirming or disconfirming analysis on this point, but was hoping for better feedback than the companyís message board is 100 pages long and the stock price is volatile so it must be going bankrupt.   
Iíve been following this situation closely since Picasso brought it to the board and think it is interesting again at this price.  The assets havenít changed, however, the control issue from 2016 is resolved, Hillsboro is no longer on fire and there is the real possibility of reopening it, and the coal price environment is better now than then.  Why is it selling for a third of the price as it was in 2016?  Thanks!

I've followed coal for a long time, and rarely commented on this thread, and there was a time when it could have worked out, but things fell apart pretty quickly. For what its worth, HCC is the coal you want to be in, at least over the past few years. Warrior Met Coal for example has paid out numerous special dividends and maintained the balance sheet. Thermal coal is just not appeasing, no matter what the cost curve is, because the industry is struggling. Who knows what happens when ARch/Peabody combine their operations, that's a ton of scale.

I'd just hone your attention to pure play met coal, or materials related to recycled steel like graphite electrodes.




Spekulatius

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Re: FELP - Foresight Energy
« Reply #1097 on: September 08, 2019, 05:41:29 PM »
@John Hjorth, there are lots of different investment styles and ways to make money, it sounds like this type of investment doesn’t jive with your style which is fine. 
The industry is in cyclical decline in the US, however, it is going to be a significant part of the US energy makeup for decades to come and coal power plants are being built in developing countries at a faster rate than they are getting decommissioned in developed countries.  FELPs mines are at the bottom of the US cost curve so they should be throwing off lots of cash flow for many years to come.  It isn’t entirely certain these cash flows will flow to the current equity holders, however, I can envision plausible outcomes where they do.  The market doesn’t seem to be pricing these positive scenarios into the stock.  I appreciate confirming or disconfirming analysis on this point, but was hoping for better feedback than the company’s message board is 100 pages long and the stock price is volatile so it must be going bankrupt.   
I’ve been following this situation closely since Picasso brought it to the board and think it is interesting again at this price.  The assets haven’t changed, however, the control issue from 2016 is resolved, Hillsboro is no longer on fire and there is the real possibility of reopening it, and the coal price environment is better now than then.  Why is it selling for a third of the price as it was in 2016?  Thanks!

The fact that coal plants are being build in development countries (probably true, but even China deemphasizes coal power nowadays) is irrelevant, because coal will be sourced locally, since it is simply not worth transporting far (too little value for the tonnage).

Metallurgical als coal used for steel production is roughly 5x+ more expensive per ton and henc is worthwhile to transport where it is needed.
To be a realist, one has to believe in miracles.

Ismael

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Re: FELP - Foresight Energy
« Reply #1098 on: September 08, 2019, 09:18:54 PM »
Most who have followed this situation probably agree that there is a lot of value in FELPs assets, however, the equity holders cant get to it because of the debt overhang.  At a high level there are two paths that solve this debt overhang problem.  Restructure and/or price goodness.  Picasso explained possible restructuring scenarios on this thread a few months ago.  In the discussion there was skepticism that the restructuring could be financed with pure debt, but at least Murray is incentivized to do it outside of bankruptcy.  How probable is it that thereís a partner out there who would work with Murray to help raise the financing or would any possible partner be better off waiting to see if FELP goes bankrupt?  Letís say ALRP is considering partnering.  If they wait to see if FELP goes bankrupt, they may be able to avoid Hillsboro volumes hitting the market until FELP debtors take the company (if no one else helps with the financing).  On the other hand they could help with the financing and get a piece of Hillsboro/FELP.  Either way the volumes are going to hit the market.  Why not get a piece of it?
Of course, high prices fix the problem too.  The Peabody partnership is probably good for pricing.  SGA is a tiny percentage of the cost structure and most of the mining is done with machines so there wont be a lot of opportunity to remove costs.  The partnership seems to be more about making sure coal producers act rationally to manage the secular decline in demand in the states.  Due to the shipping costs Spek mentioned US prices are somewhat insulated from global prices so we shouldnít see a big pickup in US prices if global prices pick up, however, FELP was placing profitable orders abroad when the prices were high.  If global prices increase, FELP may be able to land a long term contract for the Hillsboro volumes without impacting domestic prices (which Murray is sensitive to).  Additionally, around 10% of US volumes are exported abroad.  If those exports are unprofitable, then they are probably looking for a home in the US and pressuring US prices. 
Right now the market is putting a very low probability on FELP fixing its debt overhand problem.  Is it right?