Attached files

file filename
8-K - 8-K - Patriot Coal CORPd322118d8k.htm
Exhibit 99.1


1
Some of the following information contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended,
and is intended to come within the safe-harbor protection provided by those sections.
Forward-Looking Statements
Certain statements in this presentation are forward-looking as defined in the Private Securities
Litigation
Reform
Act
of
1995.
These
statements
involve
certain
risks
and
uncertainties
that
may
be
beyond our control and may cause our actual future results to differ materially from expectations.  We
do not undertake to update our forward-looking statements.  Factors that could affect our results
include, but are not limited to: U.S. and international financial, economic and political conditions; coal
price volatility and demand, particularly in higher margin products; geologic, equipment and operational
risks associated with mining; reductions of purchases or deferral of deliveries by major customers;
changes in general global economic conditions, including coal, power and steel market conditions;
availability and prices of competing energy resources for electricity generation; changes in the
interpretation, enforcement of application of existing and potential laws and regulations affecting the
production and use of our products; the availability and costs of credit, surety bonds and letters of
credit; weather patterns and conditions affecting energy demand or disrupting supply; our ability to
identify and implement cost effective solutions for selenium water treatment; the passage of new or
expanded regulations that could limit our ability to mine, increase our mining costs, or limit our
customers’
ability to utilize coal as fuel for electricity generation; existing or new environmental laws
and regulations, including those related to selenium, and changes in the interpretation, enforcement or
application thereof; failure to comply with debt covenants; the outcome of pending or future litigation;
changes in the costs to provide healthcare to eligible active employees and certain retirees under
postretirement benefit obligations; increases to contribution requirements to multi-employer retiree
healthcare and pension plans; our ability to attract and retain qualified personnel; negotiation of labor
contracts, labor availability and relations; customer performance and credit risks; inflationary trends;
downturns in consumer and company spending; supplier and contract miner performance and the
availability and cost of key equipment and commodities; availability and costs of transportation; the
Company’s ability to replace coal reserves; the outcome of commercial negotiations involving sales
contracts or other transactions; our ability to respond to changing customer preferences; and the
effects of mergers, acquisitions and divestitures.  The Company undertakes no obligation (and
expressly disclaims any such obligation) to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.  For additional information
concerning
factors
that
could
cause
actual
results
to
materially
differ
from
those
projected
herein,
please refer to the Company’s Form 10-K and Form 10-Q reports.
Statement on Forward-Looking Information


2
Long-Term Growth in Global Coal Markets


Strong Long-Term Global Seaborne Coal Demand
Thermal
Metallurgical
Long-term sustainable seaborne demand, led by Asia
Source: McCloskey
3


4
Drivers of Global Coal Demand
Global met & thermal coal demand driven by China & India
Asian Seaborne Demand


World Thermal Coal Consumption by Region
5
Global thermal coal consumption expected to steadily grow


6
Increasing Global Vehicle Production
Global production expected to grow over 35% by 2019


7
Recovering North American Vehicle Production
Production expected to reach pre-recession levels in 2013


8
Current Global Coal Markets


Metallurgical
Current Market Conditions
Current market weakness leading to reduced U.S. coal production
9
Thermal
“Perfect Storm”
in the U.S.
Low natural gas prices
Mild winter
Increased regulation
Industrial production not
yet fully recovered
U.S. exports to Europe
expected to be sustainable
U.S. production being idled
Strengthening U.S. demand
Weaker international demand
European sovereign debt
issues
Chinese growth rate
declining slightly
U.S. exports may soften, but
expected to remain at
historically high levels
Australian production
increasing after 2011 flooding
U.S. production being idled
Demand
Supply


Domestic & Global Steel Mill Utilization
Both domestic & global steel mill utilization rates are at 70-80%
Global utilization has weakened in recent months
10
0
10
20
30
40
50
60
70
80
90
100
U.S.
Global
Updated:
03/03/12


11
Increasing U.S. Total Coal Exports
U.S. coal exports of more than 100 million tons in 2011
International buyers looking for geographic diversity of supply


Export Coal & Steel Prices
Met coal pricing remains strong by historical standards
Historical re-basing to higher lows and higher highs
12


International Thermal Coal Prices
13


14
Overview of Patriot


Patriot’s Strengths
15
Focused on evolving growth markets
Metallurgical coal production
Increasing exports
Modular mine portfolio to adjust to demand
Leverage to the market
Met Build-Out program
Legacy thermal contract roll-off
Culture
Experienced management team
Comprehensive safety program & environmental stewardship
Disciplined approach, focused on planning and execution
Future growth
Organic –
Strong and accessible reserve base, particularly high-quality met
M&A –
Bolt-on and transformational
Product & transportation flexibility


16
Product Diversification
Diverse locations, products & mining methods
Significant met & thermal coal exports
APP
ILB
CAPP
Met
CAPP
Thermal
NAPP
ILB
Export
Domestic
Surface
Reserves
1.9 Billion Tons
2011 Shipments
2011 Tons Sold
31.1 Million Tons
Mining Method
Underground


17
Advantage of Diversity
Multiple quality & transportation options
Multiple Basins
1 NAPP complex
9 CAPP complexes
3 ILB complexes
Multiple Coal Qualities
5 Met coal complexes
8 Thermal coal complexes
Transportation Optionality
Rail
Barge
East Coast & Gulf exports


18
Limited volumes remain unpriced, although some customers 
requesting deferrals
Priced Position in 2012
Priced
Business
Current
Market
Metallurgical
$144
TBD
Appalachia
Thermal
65
$55 –
$67
Illinois Basin
50
45 –
60
0
5
10
15
Metallurgical
Appalachia
Thermal
Illinois Basin
Priced
Unpriced


19
Thermal production likely to decline from above level as year
progresses
Priced Position in 2013
Priced
Business
Current
Market
Metallurgical
NA
TBD
Appalachia
Thermal
$67
$60 –
$75
Illinois Basin
50
40 –
55
Includes the re-pricing of a legacy
contract expiring in 2012


20
Financial Metrics
EBITDA
(in Millions)
Steady improvement in EBITDA and liquidity
Available Liquidity
(in Millions)


21
How Patriot is Responding to Current Markets


Increasing Exports
Expect double-digit exports in 2012
22


Met Build-Out Program
Multi-year plan to increase our
base of higher-margin
metallurgical coal products
Increase in metallurgical tons
sold, as well as met being a
higher percentage of our total
sales 
Modular mine portfolio allowing
the versatility to dial our met
production up or down in a timely
manner in response to market
conditions
23


Recent Actions to Match Production to Demand
Metallurgical
Reducing production at Rocklick
and Wells complexes
Idling Gateway Eagle mine and one CM unit at Black Oak mine
Idling certain contractor mines
Gateway Eagle and Black Oak on “hot idle”
to quickly bring
production back on-line
Thermal
Idling Big Mountain complex, which produced 1.8 million tons   
in 2011
“Sold out”
for 2012 deliveries of Appalachian thermal coal
24
Short-term inventory build and lower first half of 2012 shipments


25
Patriot’s Long-Term Strengths


Patriot’s Strengths
26
Focused on evolving growth markets
Metallurgical coal production
Increasing exports
Modular mine portfolio to adjust to demand
Leverage to the market
Met Build-Out program
Legacy thermal contract roll-off
Culture
Experienced management team
Comprehensive safety program & environmental stewardship
Disciplined approach, focused on planning and execution
Future growth
Organic –
Strong and accessible reserve base, particularly high-quality met
M&A –
Bolt-on and transformational
Product & transportation flexibility



28
Reconciliation of EBITDA to Net Income (Loss)
($ in Millions)
2009
2010
2011
EBITDA
$110.7
$141.9
$176.7
Depreciation, Depletion & Amortization
(205.3)
(188.1)
(186.3)
Sales Contract Accretion, net
298.6
121.5
55.0
Asset Retirement Obligation Expense
(35.1)
(63.0)
(81.6)
Restructuring & Impairment Charge
(20.2)
(15.2)
(13.6)
Interest Expense & Other
(38.1)
(57.4)
(65.5)
Interest Income
16.6
12.8
0.2
Income Tax Provision
-
(0.5)
(0.4)
Net Income (Loss)
$127.2
$(48.0)
$(115.5)