November 3, 2022 - Peabody (NYSE: BTU) today reported net income attributable to common stockholders of $375.1 million, or $2.33 per diluted share, for the third quarter of 2022, compared to a net loss attributable to common stockholders of $44.2 million, or $0.38 per diluted share in the prior year quarter. Peabody's third quarter 2022 results included a $90.4 million unrealized mark-to-market gain related to its coal hedging activities. Peabody had Adjusted EBITDA of $438.9 million in the third quarter of 2022 compared to $289.1 million in the third quarter of 2021 and generated operating cash flow of $494.7 million in the third quarter of 2022 compared to $4.4 million in the third quarter of 2021.
"All of our business segments continued to build on first half momentum and reported strong performance results, delivering Free Cash Flow1 of over $460 million and Adjusted EBITDA of $439 million while recovering from significant weather events in the early part of the third quarter, setting the stage to finish the year even stronger," said Peabody President and Chief Executive Officer Jim Grech. "Coal prices remain at levels that result in a favorable outlook for each of our operating segments. We are pleased to be moving forward with redevelopment of the North Goonyella southern reserves to unlock the value of this strategic asset as we continue to strengthen our balance sheet."
Third Quarter Highlights
1 Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. Adjusted EBITDA margin is equal to segment Adjusted EBITDA divided by segment revenue. Revenue per Ton and Adjusted EBITDA Margin per Ton are equal to revenue by segment and Adjusted EBITDA by segment, respectively, divided by segment tons sold. Costs per Ton is equal to Revenue per Ton less Adjusted EBITDA Margin per Ton. Management believes Costs per Ton and Adjusted EBITDA Margin per Ton best reflect controllable costs and operating results at the mining segment level. We consider all measures reported on a per ton basis, as well as Adjusted EBITDA margin, to be operating/statistical measures. Please refer to the tables and related notes in this press release for a reconciliation and definition of non-GAAP financial measures.
North Goonyella Redevelopment
We have begun the initial steps to redevelop the Company's North Goonyella mine, a premium hard-coking coal longwall operation in Australia with over 70 million tons of reserves. The project will benefit from substantial infrastructure and equipment in place at the mine including a new 300-meter longwall system, a proven coal handling preparation plant (CHPP), a dedicated rail loop for transport to the Dalrymple Bay Coal Terminal (DBCT), and an accommodation village with housing and service amenities for more than 400 workers. North Goonyella is expected to reweight Peabody's long-term production and revenue toward metallurgical coal and to generate attractive returns at historical long term metallurgical prices.
The initial $140 million of redevelopment capital expenditure has been approved and includes further ventilation, equipment, conveyors, and infrastructure updates in anticipation of reaching development coal, subject to regulatory approvals, in the first quarter of 2024. Cash flows from operations will fund all redevelopment costs as the Company continues to strengthen the balance sheet. Development costs beyond the current Board approved amount are estimated to be $240 million, allowing longwall operations to commence in 2026. Project returns are estimated at approximately 25%, solely for 20 million tons of longwall production over five years, with further options to develop the remaining reserves.
During the third quarter, the seaborne thermal segment shipped 3.7 million tons, 300 thousand tons lower than second quarter while export tons decreased by 600 thousand tons primarily due to previous weather events and heavy rainfall in the early part of the third quarter. The average export realized price increased 31 percent to $187.94 per ton, despite 264 thousand metric tons sold at $84.00 under the hedge program that extended the life of the Wambo underground mine. Third quarter seaborne thermal segment costs of $49.22 per ton were higher primarily due to lower production from Wambo OC JV and higher sales price sensitive costs. The segment reported Adjusted EBITDA margins of 48 percent and Adjusted EBITDA of $171.2 million, in the third quarter.
Wilpinjong shipped 2.8 million tons at an average realized price of $72 per ton, which included 0.8 million tons of export sales at an average realized price of $206 per ton and 2.1 million domestic tons. Average Wilpinjong costs of $31.20 per ton were 7 percent lower than the prior quarter due to higher production volume. In the third quarter, Wilpinjong contributed $115.0 million to segment Adjusted EBITDA and had $203 million of cash at September 30, 2022.
During the third quarter, the seaborne met segment shipped 1.8 million tons at an average realized price of $179.77 per ton, 46 percent lower compared to the prior quarter, in line with average Premium Hard Coking Coal (PHCC) pricing change of 44 percent. Tons sold increased by approximately 0.2 million tons, with higher production from Metropolitan offsetting lower Shoal Creek volume. Total segment costs of $114.32 per ton were 21 percent lower due to improved Metropolitan productivity and lower sales price sensitive costs. The segment reported 36 percent Adjusted EBITDA margins and Adjusted EBITDA of $113.2 million, in the third quarter.
The PRB segment shipped 22.3 million tons at an average realized price of $12.99 per ton in the third quarter, $0.55 per ton better than the second quarter. Tons sold increased by approximately 3.8 million tons, due to higher customer nominations and improving rail performance. PRB costs per ton were 10 percent lower primarily due to higher production levels. For the third quarter, the segment reported 13% Adjusted EBITDA margins and Adjusted EBITDA of $37.9 million.
During the third quarter, the Other U.S. thermal segment shipped 4.8 million tons at an average realized price of $54.58 per ton, a 6 percent increase in realized prices compared to the second quarter. Costs per ton increased 6 percent primarily due to higher repairs and maintenance. The segment reported 28 percent Adjusted EBITDA margins and Adjusted EBITDA of $72.7 million.
Corporate and Other
In the third quarter, the company recognized income from equity affiliates of $27.5 million ($120.9 million year to date) primarily related to its fifty percent interest in Middlemount and related 0.4 million attributable tons of metallurgical coal (1.2 million tons year to date). Production in the third quarter was negatively impacted by severe rains in Australia in the early part of the third quarter.
Balance Sheet and Cash Flow
"Peabody's diversified product segments continue to generate substantial Free Cash Flow, which allows us to invest in a financially attractive project to enhance our metallurgical coal portfolio while continuing to strengthen our balance sheet," said Peabody Executive Vice President and Chief Financial Officer Mark Spurbeck.
Peabody ended the quarter with $1,354.5 million of cash and cash equivalents, $485 million more than total debt. In the third quarter, the company generated $461.3 million of Free Cash Flow. Cash margin posted associated with the company's coal hedging activities decreased $78 million in the third quarter to approximately $466 million at September 30, 2022.
The company continued to reduce debt levels, retiring approximately $186 million of senior secured debt during the quarter and had $143 million of additional repurchase offers on the Wilpinjong subsidiary 10% secured debt outstanding at September 30, 2022. The company posted an additional $31 million of cash collateral in support of future reclamation obligations, bringing total cash collateral supporting surety bonds to $88 million, which is reported in Investments and Other Assets on the Company's balance sheet. Based on third quarter Free Cash Flow results, an additional $62 million of cash will be posted in the fourth quarter.
Fourth Quarter 2022 Outlook
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