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Alpha Natural Resources in 1Q15: Have Cost Savings Stalled?

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Cost of sales per ton

Alpha Natural Resources (ANR) reported an average adjusted cost of sales per ton of $37.11 in 1Q15, down from $41.25 in 1Q14. Meanwhile, the cost per ton was higher than 4Q14’s $35.73. The drop in cost over 1Q14 was primarily due to a higher share of low-cost PRB (Powder River Basin) coal in the revenue mix. PRB coal’s share of total volumes has gone up from 44% in 1Q14 to 51% in 1Q15. At the same time, PRB coal’s share in total coal revenues has gone up to 15.9% in 1Q15 from 12.2% in 1Q14.

ANR and its peers (KOL), including Arch Coal (ACI), Walter Energy (WLT), and Peabody Energy (BTU), are attempting to cut costs amid a difficult environment for the industry.

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Powder River Basin

Cash costs per ton at the company’s PRB segment came in marginally higher at $10.38 a ton in 1Q15 compared to $10.23 a ton in 1Q14. But this is still lower than 4Q14’s $11.16 a ton.

Eastern coal—steam and metallurgical

Cash costs per ton in the east came in at $65.35 in 1Q15 compared to $57.55 in 4Q14 and $65.73 in 1Q14. Note that the company saw a ~$5 benefit from asset disposal and liability adjustments in 4Q14. While ANR’s costs in the east seem to have stabilized, Arch Coal (ACI) continued to drive down costs in the Appalachian in 1Q15.

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