Foresight Energy said it anticipates selling at least a third of its Illinois steam coal production, perhaps more, into the export market in 2018 after such sales accounted for 33% of the 5.24 million tons the St. Louis-based company sold in the first quarter this year.
Two primary motivations behind the higher export sales are low natural gas prices domestically and higher sales price realizations from shipping coal overseas as opposed to marketing it in the United States, said Robert D. Moore, Foresight president and CEO.
The company reaffirmed projected coal sales volumes of 21.5 million tons to 22.8 million tons this year, with at least 7 million tons destined for export.
“We have 6.7 million tons contracted for the export market with the possibility of increasing that to 9 million tons to the export market for the full year,” Moore said.
Moore said he has seen a “decent amount” of domestic requests for proposals for steam coal this year “and a movement upward in the price of Illinois Basin coal, a positive move as it relates to folks being more disciplined and recognizing there is a tightening as to the availability of coal for the remainder of this year.”
The export market, he noted, “has pulled a lot of volume out of the domestic market.”
Currently, Foresight is seeing prices for its coal in the high $30s to mid-$40s per ton. The company reported average first-quarter coal sales of $45.49/ton, down 3.2% from the prior quarter, but up 5.5% from a year ago.
Foresight produced 5.67 million tons in the January-March period from its three longwall mines in Illinois, a 14.4% increase from the 4.96 million tons it turned out in the first quarter of 2017.
Potentially aiding production during the balance of 2018 is that Foresight had no planned longwall moves after May.
Moore said Foresight’s mines ranked in the top 15 underground mines in the U.S. in terms of being productive, producing on average 14 tons per man-hour worked. That has helped the company to reduce its production costs to $23.19/ton, with costs predicted to decrease even more in the latter half of 2018.
Foresight’s ill-fated Deer Run longwall mine, also known as Hillsboro, in Montgomery County, Illinois, is a different story. The mine essentially had not operated on a continuous basis since March 26, 2015, because of a nagging combustion event before Foresight announced plans earlier this year to permanently close it.
Foresight already has collected $15 million in insurance proceeds related to Deer Run, and soon expects to receive another $29 million. The company is in dispute with its insurance carriers, however, over a remaining $59 million it believes it is owed.
Some of those recovered funds will be used to pay for leased mining equipment that Foresight was not able to recover from Deer Run.
Foresight expected to write off $134 million to $172 million in Deer Run closing costs during the second quarter.
The company recorded coal sales revenue of $238.4 million in the first quarter, up from $227.8 million a year earlier. It incurred a first-quarter loss of $21.5 million, versus a loss of $111.1 million a year ago.