Author Topic: CTRA - Contura Energy  (Read 8330 times)

FF4F

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Re: CTRA - Contura Energy
« Reply #10 on: July 15, 2019, 08:49:38 AM »
Thanks!

And any idea what specifically is going on today that is causing the sell-off....seems overdone, but agree with over posters here that this will always be cheap untill they start doing buybacks, or paying dividends.

I also find this site usefull for coal: https://www.metalbulletin.com/steel/steel-raw-materials/coking-coal.html
« Last Edit: July 15, 2019, 08:51:17 AM by FF4F »


peterHK

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Re: CTRA - Contura Energy
« Reply #11 on: July 15, 2019, 04:42:18 PM »
Probably the Blackjewel liabilities?

From their 10-k "On December 8, 2017, Contura closed a transaction (“PRB Transaction”) with Blackjewel to sell the Eagle Butte and Belle Ayr mines located in the PRB, including applicable permits. Alpha similarly sold properties for which the permits are in the process of being transferred. During the permit transfer period we must maintain the required reclamation bonds and related collateral, which are off-balance sheet arrangements. A local citizens organization filed objections to the permit transfer with the Wyoming Environmental Quality Council in November, 2018. The objections are scheduled to be heard in May, 2019. The Company believes that the objections are without merit. If the permit transfer process is not completed as expected, however, or if there are complications in connection with the process, we will remain obligated to maintain these bonds and collateral, which could materially and adversely affect our business and our results of operations."

It's worth noting that these are bonded with collateral, meaning the gross liability is $247, but net it is likely smaller than that. Further, these are usually structured as payment streams so the actual impact to Contura is probably limited.

But this does go to show: they paid $198mn for ANR. This liability likely destroys that equity, and Crutchfield clearly did not do DD on selling the mines to Blackjewel as if he had he might have thought twice about the counterparty risk.

If anything, Blackjewel's bankruptcy is not as huge a net negative as well as there's now a large thermal producer offline, which helps thermal prices. CTRA makes very little from their thermal business, so higher prices are a nice little bump.

FF4F

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Re: CTRA - Contura Energy
« Reply #12 on: July 18, 2019, 01:33:57 AM »
It's worth noting that these are bonded with collateral, meaning the gross liability is $247, but net it is likely smaller than that. Further, these are usually structured as payment streams so the actual impact to Contura is probably limited.

Would you be willing to elaborate?

The hard collateral seems to be fairly limited (Some ranch real estate, presumably worth 30M). There also seem to be some 220M in third party-bank issued sureties. However, will these sureties pay-out because Blackjewel is now bankrupt, or does the performance obligation still lie with Contura as the holder of the Permits in your opinion? (Press coverage seems to imply the latter, as they say Contura is still 'on the hook'. In which case, I assume, the surety bonds only pay out when Contura can't) 

Wrt the payment stream characteristic: I assume you mean that the discounted value of the liability is smaller because it will be paid out over a couple of years? This would reduce the potential to give capital back to shareholders by ~ 225-240M in 3-4 years, with presumably the majority of that front loaded, so discounted at 10% perhaps 180-200M hit to current value?

From that perspective, It seems fair that the company lost ~20% since late June (other miners ~ 5%). The 15% difference implies market cap loss of ~150M. With stated liabilities as described above, that is still a little less than what the present value of the blackjewel liability comes down to.

However, if they manage to operate the mine break-even, they could push those liabilities out, and thereby earn 10-20% on cash payments that are deferred.

So to conclude, the market does not seem to overreact, and if anything, a mine closing scenario that would lead to pay-out in the next 3-4 years does not yet seem to be fully priced in (versus price levels of late June - Not saying those represent fundamental value or anything).

Thanks in advance

Edit: yes Contura will likely pay for it - unless a new operator comes in. Based on wording, it does not look like they are thinking of operating the mines themselves.

"As Blackjewel's bankruptcy process unfolds, we continue to believe that the best scenario for all stakeholders would be for Blackjewel, or an alternate third-party operator, to secure appropriate financing to run these mines and maintain the employment of the operating team for the foreseeable future," said Andy Eidson, interim co-chief executive officer. "As such, we will continue to work proactively with Blackjewel's new leadership, the State of Wyoming, and other involved parties to help move this process toward a positive outcome."

"Irrespective of arriving at a preferred solution that allows for the continued operation of the Belle Ayr and Eagle Butte mines, Contura fully intends to honor our obligations as permit holder for these mines,"


https://www.prnewswire.com/news-releases/contura-provides-update-on-ceo-search-300887360.html


« Last Edit: July 18, 2019, 07:12:07 AM by FF4F »

NoCalledStrikes

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Re: CTRA - Contura Energy
« Reply #13 on: July 18, 2019, 02:22:06 PM »
Bagholder.

Couple thoughts:
I don't see any reason the higher BTU Cloud Peak mines which were not operating at capacity can't supply the needs of all the low sulfur coal clients. Unless Contura pays some one to reopen the mine, it's staying closed.
Animosity towards BlackJewel in local papers is off the chart.  Contura is inheriting a hot mess and accountability on parties that can pay for cleanup will be high.
Moving the former ANR PRB mines closures up 15-20 years, is the same as vaporizing 150 million.
If another shoe is to drop, I predict it would be declining met prices. 
The incoming CEO's negotiating leverage for his new contract couldn't be higher right now.

NoCalledStrikes

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Re: CTRA - Contura Energy
« Reply #14 on: July 29, 2019, 02:00:17 PM »
With the appointment of Stetson, we may have seen the low today.  His merger of legacy ANR into CTRA at a raised price under threat of a counter bid from an unqualified buyer was certainly more ingenious than anything the CTRA management ever did.  He also got a great entry price for his new CTRA options:)

FF4F

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Re: CTRA - Contura Energy
« Reply #15 on: August 01, 2019, 09:49:17 AM »
Sky seems to be falling.

I believe today's decline is due to some panick selling in Coal futures.

How do longer term holders view the situation? Are there chances for CTRA to return some capital like HCC has been doing given current Met/Thermal coal prices?


Foreign Tuffett

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Re: CTRA - Contura Energy
« Reply #16 on: August 10, 2019, 10:23:00 AM »
How are ya'll handling all the various idiosyncratic liabilities (asset retirement, acquisition-related, workers' comp and black lung) when modeling this?

At first glance, it's difficult to figure out when cash will actually go out the door for these, with the recent PBR mines situation being a good example of some of the possible concerns here.
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peterHK

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Re: CTRA - Contura Energy
« Reply #17 on: August 10, 2019, 04:40:40 PM »
I treat them all as debt.

Also I sold my shares. Had enough of this.

Foreign Tuffett

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Re: CTRA - Contura Energy
« Reply #18 on: August 14, 2019, 05:31:29 AM »
Earnings out.

1) Expensive debt in this interest rate environment

"On June 17, 2019, the company completed a new, 5-year $561.8 million second lien facility to refinance its existing Term Loan B. The interest rate is LIBOR plus 700bps for the two years after closing and increasing to LIBOR plus 800 bps thereafter, with a LIBOR floor of 2.00%."


2) Lowering volume guidance

"The company is lowering its total 2019 coal shipments guidance to a range of 23.9 million to 25.6 million tons, from the previously announced range of 24.6 million to 26.7 million tons. CAPP – Met coal guidance is reduced to a range of 11.5 million to 12.0 million tons, from 12.2 million to 12.8 million tons due to softer market conditions"


3) Looks like they beat on revenue? Only 3 analysts cover the company, so estimates may not have been terribly good.

https://seekingalpha.com/news/3491593-contura-energy-posts-mixed-q2-results-cuts-coal-shipment-outlook
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peterHK

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Re: CTRA - Contura Energy
« Reply #19 on: August 14, 2019, 07:19:37 AM »
Big red flag was the new CEO's vision to acquire things. Capital return STILL not announced.