CLD
#Well, obviously <UNK>, this is <UNK>, it isn't something to sneeze at.
But as you've ---+ as we've had for several calls whilst our bonds have been trading below face value, people have been suggesting that we use our liquidity to buy the back.
I'm still comfortable that the right thing to do, and the first thing we need to do, is maintain our liquidity and our flexibility.
I would very much like to be able to buy the bonds back, and we'll do it when we think it's the right thing to do.
But the key objective we've got is to make sure we retain our financial health, which is what we've been focused on.
And this time we will continue to evaluate it, but tempting as it is to use up our capacity liquidity on that, we don't think it's the optimum thing to do just at the moment.
Yes, I can, Jonathan.
This is <UNK>.
I think to compare us with shale-gas drilling and everything is to actually ---+ first of all, it's a different business.
And I'd advocate to you that, that's the business that in the last few years built in an awful lot of costs as they scrambled to try and drill lots of holes and get lots of gas out all over the country.
And money was not their number one objective.
I think if you look at our business, we've been steady for a long time.
And I'd put to you, if you look at us against not oil and gas companies but if you look at us against our peers, that we've actually always run a very tight ship on SG&A.
And yes, and we have reduced it.
But we actually never built in the costs that other people are taking out.
And I think that served us and our shareholders well over many years.
So I think you're comparing two very different business cycles.
We've actually taken cost out of SG&A, but I think more importantly we didn't build them in, in the first place
Well, once again you're looking at percentages of very different businesses.
They have some other very much higher cost coal.
I think if you actually look at the total spend on SG&A against us and our peers, once again I'd say that we didn't build in some of the costs that they are now taking out.
Thank you, Jonathan.
Well, I think we're clearly seeing a significant reduction in production.
If you look at Cloud Peak, we've, in 2011 we shipped 96 million tons and now we're looking at, the mid-guidance range of our guidance is 67 million for next year.
So that's a big significant reduction.
But has been going on.
And I think if you look at certainly the reductions of the Peabody you're talking about, then yes ---+ or talked about last week, then there are significant reductions to the PRB coming.
I think it's not clear where the PRB demand will stabilize, although we've got to be a lot closer to than we were a year or two ago.
And as I did say in my prepared remarks that I think there's the sign that we actually sold about 67 million ---+ contracted 67 million tons of coal over the next few years last year is actually encouraging, because it's the first time we've done that in many years.
So maybe that's a sign that we're even closer to a stable PRB demand level.
The other thing I keep reminding myself is that whilst demand's dropping, it's very easy to feel like it is going to zero.
It's obviously not, and certainly not for the PRB.
There's going to be a lot of coal burnt in American in the future.
And even if you look under things like the projections under the Clean Power Plant, you've still got 25%-plus of America's electricity coming from coal.
That's actually going to still be quite a lot of coal.
But until we actually stabilize around that level it's going to feel like there's ---+ well, there is always going to be too much coal.
I'm optimistic that the cuts that are going on now will actually bring us to that right-sizing before too long and then we'll be able to have a more stable, sustainable business,
In terms of the shipments, they're obviously are down significantly because the winter's being so mild in areas anywhere our coal's burnt.
And natural gas price has been so low.
But it's too early to have any figures to see if inventories are come down at the moment, through January and February.
So obviously it's just being cold in the East.
But I think overall it's been a pretty mild winter so far.
So it's too early to say on that.
My take on it is, is clearly the trains' shipments are very low, which is the sort of 30% down that people are talking about, and we are certainly experiencing that, which is why we flagged that we expect the first quarter and the first half to be slow.
But I'd also say that our customers have contracted 65 million tons of coal.
We expect them to take it.
And that's what's occurred in the last few years.
So I think clearly it's only, what, February 17.
The year's got a long way to go.
If there's an average summer, I think we'll be fine.
If it's a hot summer, that will push things towards the top end of our guidance, potentially.
If there's a really mild summer, that would be bad.
And I think that's what we've got to manage with in the coal industry going forward.
But I'm comfortable that I think we're closer to some sort of sustainable level after all the closures of plants that went on last year the MATS rule.
And now there's some sort of breathing space as people work out what to do with the clean power plant, whatever comes from that as it goes through its process.
The other point I'd make is that gas has been pretty low priced now for a while.
So most utilities who can switch to gas have done so.
So that's already baked into the projections for this year.
That would be better than if we were projecting coal burned based upon, say, a $3.50 gas price then and went to $2.
That would be ---+ have impact in year.
But I think we've already got the impact of low gas prices built in.
And that's why our shipments are projected to be down.
But the second half's always stronger.
I think the first quarter is going to be very slow.
And traditionally the second quarter is actually the slowest for the year.
But it's going to be vying with the first quarter, I fear, this year just because of the way the winter started.
When we look at the cost, we don't go into specific cost-per-ton guidance, But the factors that are going in, you've got the right key variable, which is the volume shift because that does impact a certain fixed component of it.
We do expect to maintain a level of the diesel benefit throughout 2016.
And as we've looked at the mining sequence and the equipment mix, and particularly this is at the Antelope mine as the drag line becomes operational in the second half of the year, that will be a benefit to our mining operations and therefore cost performance.
But I think generally those are the key variables that are considered in the costs looking forward (multiple speakers).
We should be on the lower end of that five-day percent range that <UNK> refers to in his words in there.
The future cash payments, we talk about them in combined terms.
And the amounts will be in the 10-K.
I mentioned that we had $30 million upfront and expect similar payment in 2016.
The combined amounts for 2017 and 2018 go to $38 million over both.
That's both years combined, So $19 million and $19 million.
As we look at what we had talked about, you mentioned it's the undiscounted commitment table that we had previously disclosed.
And when we entered into the one agreement you could see a $100 million reduction that didn't factor in the other part of the negotiation.
So we are trying to be very sensitive, but as transparent as we can to the investors.
Sensitive to the port-and-rail partners who accommodated these amendments to support us in the medium term
It might [be] phrasing.
There's absolutely a reduction.
What we had talked about in the previous cycles when we shipped and where the take-or-pay exposure is, that's ---+ in context we were contracted to be 6.6 million tons up to 7.2 million tons.
And the neutral point is about $20 per ton loss.
So that gives you some data points to say what we would've been occurring under a pure take-or-pay without shipping but without amending.
Sure.
As you look at the reconciliations in the earnings release, what we do is if it's just a market movement but an unsettled contract, we adjust that out.
But as soon as it settles then we add it back in.
So we take out the volatility during the cycle to our adjusted EBITDA, but we do recognize upon settlement either the benefit or the cost associated with that financial contract.
Effectively as we ended 2015 with low oil prices, that put the liability on our books that we haven't settled.
So that's a market adjustment that we take out.
But as we settle those contracts through 2016, that will be a cost to the business and a burden to our EBITDA.
There's two line items that are specifically disclosed in the reconciliation.
Thanks, <UNK>.
That, I believe, actually is more of a reclassification on our balance sheet as we move some certain items, particularly around our royalties and production taxes, outside of the accrued expenses and down into a long-term liability.
<UNK>, this is <UNK>.
I can confirm that and get back to you on that.
That's a different question.
I can answer affirmatively that the $37.5 million is a clean number.
We talked about quarterly payments, yes.
And what I was mentioning the $37.5 million, it's comprised of upfront payments of $30 million as well as we've already made our in 2015, our first-quarter 2016 cash obligation payments to the port and rail for the first quarter of 2016
The cash flow isn't ratable evenly over the three years.
It actually declines in 2017 and 2018.
But that would be a good way to think about the quarterly cash outflow for 2016.
We aren't giving ---+ on 2016 we talked about $30 million combined.
The benefit that 2016 has that 2017 doesn't have is $7 million worth of hedge, hedge benefit that won't be repeated.
Hi, <UNK>.
<UNK>, this is <UNK>.
I think first of all, I don't think ---+ we don't have a great deal of capacity to bring production back.
But equally I'd say I don't think there's any great chance of [coal] into the coal market suddenly going up.
We're thinking more about it coming down to a stable sustainable level somewhere not too far south of where it is this year.
But let's wait and see how that plays out.
We're not think it is suddenly going to ---+ US coal production's going back to the billion tons and we have to be ready for it.
We're thinking about managing this business for a future that's at a lower level.
And we've been adjusting to that.
In terms of the costs, if you actually look at what we've been doing with our costs, we've been ---+ given that we've got higher strip ratios and we've got increasing haul distances, we've been doing everything we can to overcome that through operational improvements, obviously moving the drag line down to ---+ Antelope will help there.
But overall we just keep looking at every opportunity we've got, whether it's through preventive maintenance, making sure we operate the equipment to last a long time, bringing work in-house to our own rebuild center on [sending out] contracted.
We're looking at across the whole operational board, not just there but also in SG&A to make sure that we bring down any costs and make sure we don't spend anything unless we absolutely think it's necessary to make sure that we manage the fixed costs down as much as we can with the variable costs as operation goes down
I think then we'd point you back to the royalties will be what they'll be.
The fuel will be what it will be.
And then the underlying costs, we'll be fighting to try and keep the 5% to 8% underlying increase down as far as we can.
And the 5% to 8% will be made up of inflation, extra workflow, labor, health cost, the whole lot of other things that we try and manage everyday
Well, it terms of the moratorium, as I understand that was to review royalties and everything.
And that's a three-year moratorium.
In terms of, is there are going to be any announcement before then.
I know nothing more than what's written in the press.
And we've had no contact with the DOI or whatever on that.
So we will wait and see.
Well, the [OTC] markets are about $11 at the moment for 2017.
That would be the start of where everyone would think that, that's representing where the market is.
I think it's about $12, the OTC for 2018.
Do we have any additional questions, Liz.
I really don't have any (multiple speakers).
It's a question that I can't really elaborate, show any ---+ cast any light on further than what you've read publicly.
Obviously there's a ---+ the [OSM], the Wyoming [DQ] responded to OSM and we'll have to ---+ about the deal they'd struck with Alpha.
We'll have to wait and see how that plays out.
Clearly it's a significant issue, and we'll (multiple speakers).
Business as usual.
We'll be updating our application for renewal.
There hasn't been a change in the regulation or the environment.
So we'll submit our application and we'll provide updates later in the year.
I think it was similar to the Alpha one, and the OSM wasn't happy with that.
I think you'd have to say we're waiting to see how it works.
Thanks.
Well, thank you very much.
Thanks for listening in with your questions.
Clearly 2015 was a tough year for domestic coal producers with demand being driven down by anti-coal regulations and very low gas prices.
Unfortunately 2016 looks like it will be even tougher, as the mild start to winter has increased the utilities' stockpiles.
So we'll continue to match our production to demand and look for every opportunity to reduce capital costs and operating costs without compromising the integrity of our mines.
And with that, I'll thank you once again for taking the time to listening into our call.
And we'll look forward to updating you again on our Q1 results in April.
Thank you.
