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Westmoreland Coal’s Leverage and Liquidity Position

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Interest expenses

Interest expenses for Westmoreland Coal (WLB) have gradually increased since 1Q15. In 3Q17, they were $30.0 million compared to $29.5 million in 3Q16 and $30.1 million in 2Q17.

According to company filings, the book value of its debt was $1.1 billion as of September 30, 2017. Almost 30% of that debt is due for payment in 2018. Another 30% is due in 2020, and the remainder is due after 2021. Another important thing to note is that Westmoreland Coal has nearly $497 million of asset retirement obligation. That’s the estimated cost to retrieve land and support resources at WLB mines and power plants.

Off-balance sheet risk

Westmoreland Coal’s off-balance sheet risks include bank letters of credit and surety bonds. According to the latest company filings, it has approximately $637.8 million worth of surety bonds. These bonds are supported by $66.8 million in cash collaterals. Any decline in the company’s financial health may require additional collateral to be added against these bonds. Collateral has the potential to shake up the stability of a company’s liquidity position if not managed properly.

Westmoreland Coal’s liquidity position

As of September 30, 2017, Westmoreland Coal had $44.1 million in cash and cash equivalents on its books. Under its corporate revolving credit facility, WLB also has $16.7 million available.

With expected positive future cash flows, long-dated bond maturities, and feasible interest expenses, WLB seems to stand out among peer coal (KOL) miners such as Arch Coal (ARCH), Peabody Energy (BTU), and Alpha Natural Resources (ANRZQ).

In the next and final part of this series, we’ll look at Westmoreland Coal’s guidance for 2017 and future prospects of the company.

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