Higher Western shipments did not help Peabody Energy in 4Q14



US operations

Peabody Energy Corporation’s (BTU) US operations are divided into two distinct segments: Western US mining operations and Midwest US mining operations. Western operations include three mines in the Powder River Basin (or PRB) and three mines in the Southwest. The Midwest operations include ten mines in the Illinois Basin and one mine in Colorado.

Other major PRB coal producers (KOL) include Cloud Peak Energy (CLD), Arch Coal (ACI) and Alpha Natural Resources (ANR). All major American coal producers are part of the iShares Russell 3000 ETF (IWV).

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Peabody Energy Corporation’s US operations sold 49.2 million tons in 4Q14, 4% higher than 4Q13’s 47.3 million tons.

Midwest volumes dropped to 6.1 million tons in 4Q14 from 6.4 million tons in 4Q13. However, Western shipments more than made up for the loss of shipments in the Midwest. Western volumes were up to 43.1 million tons in 4Q14 from 40.9 million tons in 4Q13, as utilities refilled critically low coal stocks ahead of winter.

Pricing remains under pressure

Peabody Energy’s US operations notched revenue per ton of $20.20, down from $21.26 in 4Q13. This dip follows persistent pressure on thermal coal prices due to low natural gas prices as well as regulatory issues.

Western operations’ revenue per ton was down to $16.39 in 4Q14 from $16.71 in 4Q13. The Midwest revenue per ton saw significant drop to $45.99 in 4Q14, compared to $50.29 in the same quarter in 2013. The Midwest pricing is strongly driven by natural gas prices.

For more analysis on regional economics of coal, read the Market Realist series Must-know: US coal regions and producers with the best prospects. Natural gas prices remained under pressure throughout 4Q14, affecting pricing for Midwest coal.

Revenues fall on weak pricing

US revenues fell to $983.6 million in 4Q14 from just over $1 billion in 4Q13 due to a drop in Midwest revenues on lower volume and pricing.

In the next article, we will talk about the 4Q14 performance of the Australian mining segment.


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