Part I [Business](index=4&type=section&id=Item%201.%20Business) The company operates in coal mining and electricity generation, with a focus on the Illinois Basin and significant regulatory oversight - On October 21, 2022, Hallador acquired the one Gigawatt Merom Generating Station from Hoosier Energy, creating a new electric operations segment[152](index=152&type=chunk) - The coal mining and electricity generation industries are heavily regulated, leading to **significant compliance costs**[12](index=12&type=chunk)[13](index=13&type=chunk) - The company mines coal exclusively in the Illinois Basin (ILB) using the **continuous (room-and-pillar) mining technique**[68](index=68&type=chunk)[70](index=70&type=chunk) - As of December 31, 2022, the company employed **980 full-time employees**, with the entire workforce being union-free[72](index=72&type=chunk) Regulation and Laws The company's operations are subject to stringent federal and state regulations that increase costs and impact coal demand - The Inflation Reduction Act of 2022 raised the Black Lung excise tax to up to **$1.10/ton** for underground-mined coal and **$0.55/ton** for surface-mined coal[29](index=29&type=chunk) - The Abandoned Mine Lands Program fee was reauthorized through September 2034 at **$0.224/ton** for surface-mined and **$0.096/ton** for underground-mined coal[35](index=35&type=chunk) - Regulations like the Cross-State Air Pollution Rule (CSAPR) and Mercury and Air Toxic Standards (MATS) have led to retirements of coal-fired units, reducing coal demand[40](index=40&type=chunk)[41](index=41&type=chunk) - Future regulation of GHG emissions could further increase costs and negatively impact demand for coal[42](index=42&type=chunk)[43](index=43&type=chunk) U.S. Coal Industry The company operates exclusively in the strategically located Illinois Basin, competing with major producers in a highly competitive market - Hallador's subsidiary, Sunrise Coal, LLC, mines coal exclusively in the **Illinois Basin (ILB)**[68](index=68&type=chunk) - The company utilizes the **continuous (room-and-pillar) mining technique**, where rooms are cut into the coal bed[70](index=70&type=chunk) - Key competitors in the U.S. coal industry include **Peabody Energy Corporation (BTU)** and **Alliance Resource Partners (ARLP)**[71](index=71&type=chunk) Human Capital The company employs a non-union workforce and prioritizes employee health, safety, and retention through competitive benefits - At December 31, 2022, the company had **980 full-time employees**, all of whom are union-free[72](index=72&type=chunk) - The company maintains its own private mine rescue team and provides employees access to a **private health and wellness clinic**[73](index=73&type=chunk)[74](index=74&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from customer concentration, regulatory changes, ESG pressures, and declining coal demand Risks Related to our Business Key business risks include high customer concentration, challenges integrating the Merom acquisition, and restricted access to capital from ESG pressures - In 2022, **90% of coal revenue** was derived from five customers, and **100% of electric revenue** came from a single customer[82](index=82&type=chunk) - The Merom Generating Station acquisition may not achieve expected benefits and includes **environmental costs that could exceed estimates**[85](index=85&type=chunk) - As of December 31, 2022, the company was in compliance with its debt covenants, with a debt service coverage ratio of **1.49** and a leverage ratio of **2.05**[91](index=91&type=chunk)[92](index=92&type=chunk) - Investor and lender focus on **ESG matters** could negatively impact access to capital and increase costs[95](index=95&type=chunk)[96](index=96&type=chunk) Risks Related to our Industry The coal industry faces declining demand from utilities, intense competition, and costly environmental regulations targeting climate change - The domestic electric utility industry is reducing coal consumption due to competition from **natural gas and renewable energy**[105](index=105&type=chunk)[106](index=106&type=chunk)[108](index=108&type=chunk) - Climate change presents significant regulatory and financial risks, as ESG focus could **reduce demand and funding for fossil fuels**[109](index=109&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) - Obtaining necessary governmental permits is complex, while securing **surety bonds for reclamation** has become increasingly difficult and costly[121](index=121&type=chunk)[137](index=137&type=chunk) - The industry faces operational challenges from **inflation**, which increases material costs, and a **shortage of skilled labor**[135](index=135&type=chunk)[139](index=139&type=chunk) [Unresolved Staff Comments](index=29&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[144](index=144&type=chunk) [Properties](index=29&type=section&id=Item%202.%20Properties) Information regarding the company's properties is detailed in Item 7, Management's Discussion and Analysis - The discussion of the company's properties is located in **"Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations"**[144](index=144&type=chunk) [Legal Proceedings](index=29&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no material legal proceedings - None[145](index=145&type=chunk) [Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) A detailed listing of mine safety violations is provided in Exhibit 95 of the Form 10-K - A detailed listing of mine safety violations is provided in **Exhibit 95** to this Form 10-K[146](index=146&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=30&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on NASDAQ, with significant insider ownership and a broad base of beneficial owners - The company's common stock trades on the NASDAQ Capital Market under the symbol **HNRG**[147](index=147&type=chunk) - As of March 10, 2023, there were 249 shareholders of record, with an estimated **over 5,000 street name holders**[148](index=148&type=chunk) - Officers, directors, and their affiliates hold **31.7%** of the company's common stock[147](index=147&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The 2022 acquisition of the Merom plant created a new electric segment, driving higher cash flow and debt reduction - The company now has two reportable segments: **coal operations** and **electric operations** following the Merom power plant acquisition[153](index=153&type=chunk) - In summer 2022, the company signed 2.2 million tons of new coal sales contracts at an average price of **~$125 per ton**[155](index=155&type=chunk) - Bank debt was **reduced by $26.5 million** during 2022, ending the year at $85.2 million[158](index=158&type=chunk) - Cash provided by operations increased to **$54.2 million** in 2022 from $48.0 million in 2021, due to higher operating margins[188](index=188&type=chunk) Mining Properties The Oaktown Mining Complex is the company's primary asset, with 66.3 million tons of reserves and 6.4 million tons of production in 2022 Summary Mineral Reserves (as of Dec 31, 2022) | Mine | Proven (M tons) | Probable (M tons) | Total (M tons) | | :--- | :--- | :--- | :--- | | Oaktown Fuels No. 1 | 36.2 | 0.5 | 36.7 | | Oaktown Fuels No. 2 | 28.5 | 1.1 | 29.6 | | **Total** | **64.7** | **1.6** | **66.3** | Oaktown Mining Complex Production (Saleable Tons) | Year | Million Tons | | :--- | :--- | | 2022 | 6.4 | | 2021 | 5.6 | | 2020 | 5.2 | Our Coal Contracts Revenue is highly concentrated among five customers, with 7.5 million tons contracted for 2023 and options to supply its own power plant - In 2022, **90% of coal revenue** came from five customers, including subsidiaries of CenterPoint Energy, Alcoa, AES Corp, and Duke Energy[181](index=181&type=chunk)[182](index=182&type=chunk) - Beginning in 2024, the company has the option to sell up to **3.0 million tons** of its coal annually to its Merom power plant[185](index=185&type=chunk) Forward Contracted Sales (as of Dec 31, 2022) | Year | Contracted Tons (millions) | Est. Price per Ton | | :--- | :--- | :--- | | 2023 | 7.5 | $58.70 | | 2024 - 2027 (total) | 7.3 | Unpriced/Partially Priced | | **Total** | **14.8** | | Liquidity and Capital Resources Operating cash flow of $54.2 million funded debt reduction and capex, with a $69 million capex budget planned for 2023 - Cash provided by operations was **$54.2 million** in 2022, compared to $48.0 million in 2021[188](index=188&type=chunk) - The 2023 capital expenditure budget is **$69 million**, allocated as $34 million for coal and $35 million for electric operations[189](index=189&type=chunk) - Bank debt was reduced to **$85.2 million** as of December 31, 2022, with a subsequent maturity extension to May 2024[190](index=190&type=chunk) Results of Operations The company shifted to a net income of $18.1 million in 2022, driven by higher coal margins and the new electric segment Quarterly Coal Margin Analysis (2022) | Metric | 1st 2022 | 2nd 2022 | 3rd 2022 | 4th 2022 | | :--- | :--- | :--- | :--- | :--- | | Avg Price/Ton | $41.40 | $40.23 | $49.01 | $50.87 | | Avg Cost/Ton | $39.54 | $31.83 | $37.46 | $40.46 | | **Margin/Ton** | **$1.86** | **$8.39** | **$11.55** | **$10.41** | Quarterly Net Income (Loss) (2022, in thousands) | Quarter | Net Income (Loss) | | :--- | :--- | | Q1 2022 | $(10,134) | | Q2 2022 | $(3,386) | | Q3 2022 | $1,612 | | Q4 2022 | $30,013 | [Financial Statements and Supplementary Data](index=43&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The company's financials reflect a major transformation in 2022, with assets and revenues growing significantly after the Merom acquisition Consolidated Balance Sheets Total assets grew to $630.6 million and liabilities to $415.5 million, driven by the Merom power plant acquisition Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $138,519 | $39,239 | | Total Property, Plant and Equipment, net | $480,462 | $302,824 | | **Total Assets** | **$630,554** | **$353,980** | | Total Current Liabilities | $239,602 | $64,626 | | Total Long-term Liabilities | $175,928 | $103,119 | | **Total Liabilities** | **$415,530** | **$167,745** | | **Total Stockholders' Equity** | **$215,024** | **$182,235** | Consolidated Statements of Operations The company achieved a net income of $18.1 million in 2022, a turnaround from a $3.8 million loss in 2021 Consolidated Statement of Operations Highlights (in thousands) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Total Sales and Operating Revenues | $361,991 | $247,666 | | Income (Loss) from Operations | $30,430 | $(6,044) | | **Net Income (Loss)** | **$18,105** | **$(3,754)** | | **Diluted EPS** | **$0.55** | **$(0.12)** | Consolidated Statements of Cash Flows Net cash from operations was $54.2 million, primarily used for capital expenditures and significant debt repayments Consolidated Cash Flow Highlights (in thousands) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $54,169 | $47,974 | | Net cash used in investing activities | $(53,365) | $(27,525) | | Net cash used in financing activities | $(207) | $(26,691) | | **Increase (decrease) in cash** | **$597** | **$(6,242)** | Notes to Consolidated Financial Statements Notes detail the Merom asset acquisition accounting, credit agreement amendments, and issuance of convertible notes - The Merom power plant acquisition was accounted for as an asset acquisition with total consideration of **$181.1 million**[339](index=339&type=chunk)[341](index=341&type=chunk) - The company issued a total of **$29 million** in senior unsecured convertible notes in 2022, with $10 million converted to equity[342](index=342&type=chunk)[343](index=343&type=chunk) - As of Dec 31, 2022, the company had remaining coal sales performance obligations of approximately **$593 million** under fixed-price contracts[304](index=304&type=chunk)[305](index=305&type=chunk) [Controls and Procedures](index=68&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective as of year-end 2022 - Management concluded that **disclosure controls and procedures were effective** as of the end of the period[353](index=353&type=chunk) - Management's evaluation of ICFR **excluded the recently acquired Hallador Power Company, LLC (Merom plant)**[355](index=355&type=chunk) - Management concluded that **ICFR was effective** as of December 31, 2022, with an unqualified opinion from Grant Thornton LLP[356](index=356&type=chunk) [Other Information](index=71&type=section&id=Item%209B.%20Other%20Information) A March 2023 credit agreement amendment converted debt, extended maturities, and increased the 2023 capex covenant - On March 13, 2023, the company amended its credit agreement to convert **$35 million** of its revolver into a term loan and extend maturities[367](index=367&type=chunk) - The amendment increased the 2023 capital expenditure covenant to **$75 million** and transitioned interest rates from LIBOR to SOFR[367](index=367&type=chunk)[368](index=368&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Certain Relationships](index=71&type=section&id=Items%2010-14) Required information for Items 10-14 is incorporated by reference from the company's forthcoming definitive proxy statement - Information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the company's definitive proxy statement[372](index=372&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=72&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index to financial statements and a list of all exhibits filed with the Form 10-K - This section contains the index to financial statements and a **list of exhibits** filed with the report[374](index=374&type=chunk)[375](index=375&type=chunk)

Hallador Energy Company (NASDAQ:HNRG) Q3 2022 Earnings Conference Call November 15, 2022 2:00 PM ET Company Participants Rebecca Palumbo – Investor Relations Brent Bilsland – President and Chief Executive Officer Larry Martin – Chief Financial Officer Conference Call Participants Kevin Tracey – Oberon AM Arthur Calavritinos – ANC Capital Jeff Bronchick – Cove Street Capital Lucas Pipes – B. Riley Securities Operator Good afternoon and thank you for attending today's Hallador Energy Third Quarter 2022 Earnin ...

Hallador Energy Company (NASDAQ:HNRG) Q2 2022 Earnings Conference Call August 16, 2022 2:00 PM ET Company Participants Rebecca Palumbo - Investor Relations Larry Martin - Chief Financial Officer Brent Bilsland - President and Chief Executive Officer Conference Call Participants Nick Giles - B. Riley Securities John Moran - Robotti & Company Operator Thank you for standing by and welcome to the Hallador Second Quarter 2022 Earnings Call. My name is Sam and I will be your moderator for today’s call. [Operator ...

Financial Performance - Q2 2022 net loss was $3.4 million, with operating cash flow decreasing by $2.7 million[80][82]. - Earnings per share for Q1 2022 was $(0.33), compared to $(0.03) in Q1 2021, indicating a decline in performance[102]. - Operating margins decreased by $8.3 million in the first half of 2022 compared to the same period in 2021, with margins expected to increase to approximately $20 per ton starting in Q4 2022[91]. - The effective tax rate for the six months ended June 30, 2022, was estimated at ~(2)%, significantly lower than ~25% for the same period in 2021[103]. - Management's evaluation of going concern indicates uncertainty regarding the ability to continue operations without substantial doubt[111]. Sales and Contracts - 1.6 million tons were shipped at an average sales price of $40.23 per ton, with remaining tons expected to average over $49 per ton[82][94]. - Total contracted tons for 2022 (Q3-Q4) are 4.0 million at an average price of $49 per ton, and 6.7 million tons for 2023 at an average price of $58 per ton[86][94]. - Average sales price for 2023 is projected to be approximately $17 per ton higher than the first half of 2022[87]. - The company added 2.2 million tons of new coal contracts priced over $125 per ton for delivery from Q4 2022 through 2025, expected to significantly increase margins[83]. Production and Costs - Production costs in Q2 2022 were $31.83 per ton, a decrease of $7.71 per ton from Q1 2022[82][100]. - Projected Adjusted EBITDA for 2023 is expected to exceed $160 million, up from the traditional $50 million, due to higher-priced coal contracts[87]. - Capital expenditures for the first six months of 2022 were $22.9 million, with an additional projected budget of $15 million for the remainder of the year[91]. Regulatory and Compliance - The company anticipates completing the acquisition of the Merom Power Plant in Q3 2022, subject to regulatory approvals[87]. - The company does not consider unreimbursed costs related to compliance matters to be material as of June 30, 2022[104]. - The company has identified its federal and Indiana state tax returns as major tax jurisdictions, expecting no material changes from audits[109]. Accounting and Valuation - Critical accounting estimates include coal reserves and asset retirement obligations, which could affect depreciation and impairment tests[106]. - Inventory valuation may be affected by the anticipated utilization of higher-cost coal from the Ace in the Hole mine[110]. - The fair value of interest rate swaps is based on anticipated future interest rates, which could impact financial results[108]. - The company plans to recognize certain costs related to government mandates when they can be estimated with reasonable certainty[104]. - No material changes in market risk disclosures were noted compared to the 2021 Annual Report[112].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number:001-34743 "COAL KEEPS YOUR LIGHTS ON" "COAL KEEPS YOUR LIGHTS ON" HALLADOR ENERGY COMPANY (www.halladorenergy.com) Colorado (State of incorporation) Registrant ...

Financial Data and Key Metrics Changes - For the year ended December 31, 2021, the company reported a net loss of $3.8 million or $0.12 per share, with adjusted EBITDA of $50.3 million and a reduction in bank debt by $26 million, bringing total bank debt to $111.7 million [5][9] - The leverage ratio, defined as debt to EBITDA, was reported at 2.34 times, remaining within the covenant limit of 3x [9][12] Business Line Data and Key Metrics Changes - The company shipped 6.2 million tons and produced 5.8 million tons of coal in 2021, with a target production increase to 7 million tons, representing a 21% increase [7][9] - Operating cash flow for the year was $48 million, with adjusted EBITDA of $6.3 million in the fourth quarter [9][10] Market Data and Key Metrics Changes - The average sales price for coal in 2022 is expected to be approximately $31 per ton, which is 37% higher than in 2021 [10][22] - The company has forward sales totaling 5.8 million tons for the years 2022 through 2026, with 4.5 million tons to be delivered over the next three years [8][10] Company Strategy and Development Direction - The company announced the acquisition of Hoosier Energy's 1 gigawatt Merom Generating Station, which is expected to significantly enhance future earnings and contribute to a doubling of adjusted EBITDA starting next year [10][11] - The strategy includes increasing liquidity to support working capital and forward power sales, with a focus on transitioning to renewable energy while maintaining grid reliability [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, indicating that 2023 and beyond could be very beneficial for shareholders, with expectations of moving to double-digit adjusted EBITDA [12][13] - The ongoing geopolitical situation, particularly the impact of Russia's invasion of Ukraine, has shifted global energy dynamics, leading to increased demand for coal and higher power prices [12][20] Other Important Information - The company is facing inflationary pressures affecting input costs, but management believes productivity improvements are underway, with expectations for better performance in 2022 compared to 2021 [22][23] - Maintenance capital expenditures for Hallador Power in 2023 are expected to be $16 million, with additional investments required for environmental controls to extend the plant's operational life [13] Q&A Session Summary Question: What happens after the initial 3.5-year term of the power plant contract? - Management clarified that the contract includes a step-down in capacity and energy sales, with evaluations ongoing regarding environmental upgrades needed to extend the plant's operational life beyond 2025 [16][17] Question: How does the company view refinancing opportunities? - The company is looking to increase liquidity and renegotiate terms as part of the transaction, with ongoing discussions with the bank group [19][21] Question: What is the guidance for cash costs amid inflationary pressures? - Management acknowledged rising costs due to inflation but remains optimistic about productivity improvements and expects the average cost to be around $31 per ton for the year [22][23]

PART I [Business Overview](index=4&type=section&id=Item%201.%20Business) Hallador Energy Company primarily engages in coal mining in the Illinois Basin through its subsidiary, Sunrise Coal, LLC, serving the electric power generation industry - The company's main business is coal mining in Indiana through its wholly-owned subsidiary, Sunrise Coal, LLC, primarily supplying the electric power generation industry[166](index=166&type=chunk) - The coal mining industry is heavily regulated in areas such as employee health and safety, environmental standards (air and water quality), and mine permitting, which significantly impacts operating costs[14](index=14&type=chunk)[17](index=17&type=chunk) - As of December 31, 2021, the company employed **805 full-time employees** and temporary miners, with the entire workforce being union-free[81](index=81&type=chunk) - The company competes with major producers like Peabody Energy Corporation and Alliance Resource Partners, primarily within the Illinois Basin (ILB)[76](index=76&type=chunk)[80](index=80&type=chunk) [Regulation and Laws](index=4&type=section&id=Regulation%20and%20Laws) The company is subject to extensive and costly federal, state, and local regulations covering environmental protection, mine safety, and employee health - The company is subject to extensive regulations from authorities like the Mine Safety and Health Administration (MSHA) and the Environmental Protection Agency (EPA), which impose significant compliance costs[14](index=14&type=chunk)[15](index=15&type=chunk) - The Surface Mining Control and Reclamation Act (SMCRA) requires the company to meet comprehensive environmental protection and reclamation standards, including restoring land to its approximate original contours[38](index=38&type=chunk)[39](index=39&type=chunk) - Regulations on air emissions, such as the Clean Air Act (CAA), and greenhouse gas (GHG) emissions directly and indirectly impact operations by regulating coal-fired power plants, potentially reducing demand for coal[45](index=45&type=chunk)[48](index=48&type=chunk) - The company must secure surety bonds for reclamation obligations, which have become increasingly difficult and costly to obtain, posing a potential risk to operations[44](index=44&type=chunk) [Human Capital](index=15&type=section&id=Human%20Capital) The company maintains a union-free workforce, emphasizing a strong safety culture and comprehensive employee benefits - As of December 31, 2021, Hallador Energy and its subsidiaries employed **805 full-time employees** and temporary miners, with **760 directly involved** in coal mining or washing processes[81](index=81&type=chunk) - The company maintains a robust safety program, with standards exceeding mandated guidelines, and operates its own private mine rescue team, achieving safety metrics at or below national averages in 2021[82](index=82&type=chunk) - To mitigate the spread of COVID-19, the company has implemented policies aligned with CDC guidelines and offers cash incentives to employees who provide proof of vaccination[85](index=85&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to its business and the broader coal industry, including market volatility, regulatory burdens, and competition [Risks Related to our Business](index=16&type=section&id=Risks%20Related%20to%20our%20Business) Business-specific risks include pandemic impacts, customer concentration, restrictive covenants, and challenges in accessing capital markets due to ESG focus - The COVID-19 pandemic has created significant volatility and uncertainty, impacting global economic activity, coal demand, and operational continuity[87](index=87&type=chunk) - In 2021, **95% of revenue** was derived from five customers, making the loss of any significant customer a material risk to the business[94](index=94&type=chunk) - The company's credit agreement contains restrictive covenants, including a Minimum Debt Service Coverage Ratio and a Maximum Leverage Ratio, which if breached, could lead to default[102](index=102&type=chunk) - Increased investor and lender focus on Environmental, Social, and Governance (ESG) matters may negatively impact the company's reputation, stock price, and access to capital[106](index=106&type=chunk)[107](index=107&type=chunk) [Risks Related to our Industry](index=20&type=section&id=Risks%20Related%20to%20our%20Industry) Industry-wide risks include coal price volatility, intense competition from alternative fuels, and extensive environmental regulations that could reduce long-term coal demand - The company's results are highly dependent on coal prices, which are influenced by factors beyond its control, including supply and demand, weather, and governmental regulations[110](index=110&type=chunk) - Competition from other fuels, particularly natural gas, has the potential to displace a significant amount of coal-fired electric power generation[115](index=115&type=chunk) - Extensive and evolving environmental laws, especially those targeting greenhouse gas emissions and climate change, could increase operating costs and reduce demand for coal[118](index=118&type=chunk)[119](index=119&type=chunk) - Obtaining and renewing necessary governmental permits for mining operations is a complex and lengthy process that can be subject to delays and public challenges, potentially reducing production[133](index=133&type=chunk) [Properties](index=28&type=section&id=Item%202.%20Properties) This section refers to Item 7, Management's Discussion and Analysis, for a detailed discussion of the company's mining properties - A detailed discussion of the company's properties is provided in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations"[155](index=155&type=chunk) [Mine Safety Disclosures](index=28&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company emphasizes that safety is a core value and directs stakeholders to Exhibit 95 of the Form 10-K for a detailed listing of its mine safety violations - A comprehensive list of the company's mine safety violations is available in Exhibit 95 to this Form 10-K[157](index=157&type=chunk) PART II [Market for Registrant's Common Equity and Related Matters](index=29&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Hallador Energy's common stock is traded on the NASDAQ Capital Market under the symbol HNRG, with officers, directors, and their affiliates holding 30.7% of the outstanding shares as of March 23, 2022 - The company's common stock trades on the NASDAQ Capital Market under the symbol **HNRG**[159](index=159&type=chunk) - As of March 23, 2022, there were **30,785,067 shares outstanding**, with officers, directors, and their affiliates holding **30.7%**[6](index=6&type=chunk)[159](index=159&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=29&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2021, Hallador Energy reported a net loss of **$3.8 million**, an improvement from 2020, with increased coal sales volume and a strategic acquisition of the Merom Generating Station expected to significantly boost future earnings - The company announced the acquisition of Hoosier Energy's **1-Gigawatt Merom Generating Station**, a transaction expected to close in mid-July 2022 and significantly increase future earnings[167](index=167&type=chunk)[171](index=171&type=chunk) - For 2021, the company reported a net loss of **$3.8 million**, an improvement from the **$6.2 million net loss** in 2020[214](index=214&type=chunk)[249](index=249&type=chunk) - Operating cash flow was **$48.0 million** in 2021, which was used to pay down bank debt by **$26.0 million**, and the company's **$10 million PPP loan** was fully forgiven[206](index=206&type=chunk)[214](index=214&type=chunk) - The company is increasing production to **7 million tons annually** starting in 2022 to meet rising demand, driven by favorable market conditions including high natural gas prices and strong export markets[202](index=202&type=chunk)[225](index=225&type=chunk) [Mining Properties](index=30&type=section&id=Mining%20Properties) The Oaktown Mining Complex, consisting of two active underground mines in Indiana and Illinois, represents the company's individually material property Summary of Mineral Reserves as of December 31, 2021 | Mine/Complex | Proven (million tons) | Probable (million tons) | Total (million tons) | | :--- | :--- | :--- | :--- | | **Oaktown Mining Complex** | | | | | Oaktown Fuels No. 1 Mine | 40.1 | 0.4 | 40.5 | | Oaktown Fuels No. 2 Mine | 29.7 | 1.2 | 30.9 | | **Total** | **69.8** | **1.6** | **71.4** | - The Oaktown Mining Complex is the company's individually material property, consisting of two active underground mines, Oaktown Fuels No. 1 and No. 2, located in Indiana and Illinois[175](index=175&type=chunk)[179](index=179&type=chunk) Oaktown Mining Complex Historical Production (Million Tons) | Mine | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Oaktown Fuels No. 1 Mine | 3.5 | 3.4 | 4.2 | | Oaktown Fuels No. 2 Mine | 2.1 | 1.8 | 2.3 | | **Total** | **5.6** | **5.2** | **6.5** | [Our Coal Contracts](index=34&type=section&id=Our%20Coal%20Contracts) In 2021, **95% of revenue** came from five key customers, with future contracted volumes extending through 2027 and the Merom Power Plant acquisition expected to significantly increase internal consumption - In 2021, **95% of revenue** came from five customers operating 10 power plants, including Vectren, Orlando Utility Commission, Alcoa, Indianapolis Power & Light, and Duke Energy[198](index=198&type=chunk)[199](index=199&type=chunk) Contracted Coal Sales Volume and Pricing | Year | Contracted Tons (millions) | Estimated Price per Ton | | :--- | :--- | :--- | | 2022 | 6.8 | $39.81 | | 2023 | 5.3 | $43.10 | | 2024 - 2027 | 6.3 | Unpriced/Partially Priced | | **Total** | **18.4** | | - Following the acquisition of the Merom Power Plant, Hallador Power Company is expected to consume **45% of Sunrise Coal's production** by 2024[202](index=202&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company generated **$48.0 million** in operating cash flow in 2021, with a 2022 capital expenditure budget of **$25 million**, and amended its bank agreement in March 2022 to provide covenant relief Cash Flow and Capital Expenditure Summary | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Cash Provided by Operations | $48.0 million | $52.6 million | | 2022 Capital Expenditure Budget | $25 million | N/A | - The 2022 capital expenditure budget is **$25 million**, with **$15 million** allocated for maintenance capex, and scheduled long-term debt payments for 2022 total **$25.7 million**[207](index=207&type=chunk) - The company amended its bank agreement in March 2022 to provide covenant relief after experiencing lower-than-expected EBITDA in Q4 2021 due to elevated costs[208](index=208&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) In 2021, coal sales volume increased to **6.17 million tons**, but average price per ton decreased, and operating costs rose due to mining challenges and workforce expansion Annual Operational Performance Comparison | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Tons Sold (millions) | 6.17 | 5.97 | | Average Price/Ton | $39.51 | $40.56 | | Average Cost/Ton | $32.16 | $31.07 | | Margin/Ton | $7.35 | $9.49 | - Operating costs per ton increased in 2021 to **$32.16** from **$31.07** in 2020, primarily due to mining challenges at the Ace in the Hole Mine and costs associated with hiring and training a larger workforce at Oaktown[220](index=220&type=chunk) - General and administrative expenses rose by **$3.2 million** in 2021, driven by legal and financing costs related to the Merom Power Plant acquisition[222](index=222&type=chunk) - The workforce increased to **797 employees and contractors** at year-end 2021 from **682** at year-end 2020 to support a production increase to over **7 million tons annually**[223](index=223&type=chunk) [Financial Statements and Supplementary Data](index=42&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The consolidated financial statements for 2021 and 2020, audited by Plante & Moran, PLLC, show a net loss of **$3.8 million** in 2021, with decreases in total assets and liabilities, and initial going concern doubt alleviated by a March 2022 credit agreement amendment Key Financial Data (in thousands) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenue | $247,666 | $244,241 | | Income (Loss) from Operations | $(6,044) | $3,098 | | Net Loss | $(3,754) | $(6,220) | | Net Loss Per Share | $(0.12) | $(0.20) | | Total Assets | $353,980 | $384,130 | | Total Liabilities | $167,745 | $194,870 | | Total Stockholders' Equity | $182,235 | $185,260 | [Notes to Consolidated Financial Statements](index=50&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key notes detail the alleviation of going concern doubt, asset impairments, bank debt compliance, PPP loan forgiveness, and remaining performance obligations - Management identified substantial doubt about the company's ability to continue as a going concern due to likely financial covenant violations, but this doubt was alleviated by a credit agreement amendment executed in March 2022 (Note 1)[261](index=261&type=chunk)[264](index=264&type=chunk) - The company recorded a **$1.6 million impairment** on assets at the idled Prosperity Mine in 2021 and a **$1.8 million impairment** on its Hourglass Sands frac sand operation in 2020 (Note 2)[289](index=289&type=chunk)[290](index=290&type=chunk) - As of December 31, 2021, total bank debt was **$111.7 million**, and the company was in compliance with its leverage ratio (**2.34** vs. **3.00** limit) and debt service coverage ratio (**1.11** vs. **1.05** limit) covenants (Note 5)[296](index=296&type=chunk)[300](index=300&type=chunk)[302](index=302&type=chunk) - The company's **$10 million Paycheck Protection Program (PPP) loan** was fully forgiven by the SBA in July 2021, resulting in a **$10 million gain** on extinguishment of debt (Note 5)[307](index=307&type=chunk) - As of December 31, 2021, the company had remaining performance obligations of approximately **$588 million** for fixed-price contracts and **$166 million** for contracts with price reopeners (Note 7)[318](index=318&type=chunk)[319](index=319&type=chunk) [Controls and Procedures](index=64&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures and its internal control over financial reporting (ICFR) were effective as of December 31, 2021, with no significant changes in ICFR during Q4 2021 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[359](index=359&type=chunk) - Based on an evaluation using the COSO framework, management concluded that the company's internal control over financial reporting (ICFR) was effective as of December 31, 2021[361](index=361&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=65&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index of the financial statements included in Item 8 and lists all exhibits filed with the Form 10-K, including credit agreements, compensation plans, certifications, and mine safety disclosures - This section contains an index of all exhibits filed with the annual report, including key agreements, certifications, and other required disclosures[371](index=371&type=chunk)[372](index=372&type=chunk)

Financial Data and Key Metrics Changes - Hallador Energy Company reported a net income of $8 million for Q3 2021, translating to $0.26 per share, and a year-to-date net income of $4 million or $0.13 per share [8] - Free cash flow for Q3 was $14.6 million, with a total of $26.4 million for the nine months [8] - Adjusted EBITDA was $20.5 million for Q3 and $43.2 million for the nine months [8] - Bank debt was reduced by $15.2 million in Q3, totaling $115 million in bank debt and $110 million in net debt as of September 30 [9] Business Line Data and Key Metrics Changes - Total shipments for the year are expected to reach approximately 6.2 million tons, with Q3 revenue increasing by 22% and shipments up by 29% year-over-year [12] - Production costs in Q3 were elevated at $33.15 per ton, which is $2.95 higher than the previous quarter and $3.85 higher than Q3 2020 [14] - The Ace In The Hole Mine is nearing the end of its reserve life, contributing to elevated costs, but a new pit is expected to open in 2022 [16] Market Data and Key Metrics Changes - Natural gas prices have significantly increased, with NYMEX gas prices rising from an average of $3 in April 2021 to $4.43 in November 2021 [18] - Coal export prices also saw a rise, with API4 prices increasing from $86 per ton in Q3 2021 to $108 per ton in October [19] - The market for coal is expected to remain strong, with Hallador anticipating higher prices in Q4 2021 and increased shipments in 2022 [20] Company Strategy and Development Direction - Hallador plans to ramp up production to 7 million tons for 2022 and 2023, focusing on hiring additional employees to support this growth [12][13] - The company aims to be debt-free in the near future, emphasizing the importance of reducing debt to capitalize on future opportunities [61] - Hallador is also exploring investments in renewable energy, with plans to develop solar and battery projects alongside its coal operations [62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a strong finish for 2021, with expectations of improved margins and higher shipments in 2022 and 2023 [20][22] - The company believes that coal will continue to play a significant role in energy generation, especially in light of potential capacity shortages in the electricity grid [23][24] - Management noted that the current market conditions are the strongest seen in years, with limited new supply expected to come online [50][81] Other Important Information - Hallador added 94 employees in October and plans to hire another 110 in the coming months to support production increases [13] - The company is facing supply chain disruptions that have led to increased costs, but these are expected to normalize in 2022 [15] Q&A Session Summary Question: Can you talk about today's market price and customer contract extensions? - Management indicated that market prices are significantly higher for new business and expressed confidence in securing contracts despite ongoing negotiations [27][28] Question: What led to the pricing dynamics for Q1 2022? - Management explained that a higher concentration of higher prices is expected in Q4 due to shipping schedules, with a mix of carryover tons affecting Q1 pricing [41] Question: How many tons are left to sell for 2022? - Management stated that they are targeting 7 million tons for 2022, with ongoing negotiations affecting the final sales volume [42][44] Question: What is the outlook for pricing in 2023? - Management expects significant price and margin improvements in 2023, with a sales book likely to reach 7 million tons [78] Question: Is there any visibility into competitors' pricing? - Management confirmed they do not have visibility into competitors' negotiations or pricing, emphasizing their focus on their own contracts [90] Question: Can you clarify the renewable business acquisition? - Management explained that the rights to plug into the grid were obtained through a joint venture, not a legacy asset, and no upfront payment was made [93][96]

Financial Performance - Q3 2021 net income was $8.0 million, with adjusted EBITDA of $20.5 million, reflecting strong operational performance [80] - Operating cash flow for Q3 was $24.1 million, with bank debt reduced by $15.2 million, resulting in a leverage ratio of 2.29X [81] - Cash provided by operations for the nine months ended September 30, 2021, was $37.0 million, up from $34.1 million in the same period of 2020 [93] - The company's interest expense decreased by approximately $4.7 million in the first nine months of 2021 compared to 2020, primarily due to a reduction in non-cash expenses from interest rate swap agreements and a declining bank debt balance [99] - The effective tax rate for the nine months ended September 30, 2021, is estimated at ~31%, down from ~69% in 2020, influenced by statutory depletion differences [104] - The company reported a basic and diluted earnings per share of $0.26 for the third quarter of 2021, compared to a loss of $(0.15) in the fourth quarter of 2020 [103] Sales and Production - During Q3 2021, the company shipped 2.04 million tons, with an average sales price of $38.71 per ton, the lowest of the year [81] - The company expects to ship 1.6 million tons in Q4 2021 at an average price of $41.40 per ton, projecting a total of 6.2 million tons for the full year [81] - In the first nine months of 2021, the company sold 4,619,000 tons at an average price of $38.86 per ton, compared to 4,355,000 tons at $40.68 per ton in the same period of 2020, reflecting a decrease in average price due to contract mix changes [96] - For the third quarter of 2021, the company sold 2,042,000 tons at an average price of $38.71 per ton, down from 1,585,000 tons at $40.85 per ton in the third quarter of 2020, attributed to contract mix changes [101] Operating Costs - Production costs in Q3 2021 were $33.15 per ton, a $2.95 increase from Q2 2021, attributed to longer travel times and supply chain disruptions [81] - Operating costs for all coal mines averaged $31.17 per ton for the nine months ended September 30, 2021, up from $30.03 per ton in 2020, exceeding prior guidance of $29-$30 per ton [97] - The average cost per ton for Oaktown was $29.17 for the first nine months of 2021, compared to $28.59 in 2020, indicating rising operational costs [97] - The company expects operating costs associated with the idled Prosperity mine to be $0.3 million for the remainder of 2021, with prior costs of $0.8 million during the nine months ended September 30, 2021 [97] Market Outlook - The company anticipates higher average sales prices for 2022 compared to 2021, supported by strong coal demand [81] - The coal market shows signs of improvement, with significant increases in gas prices and coal export prices [88] Employee and Administrative Costs - General and administrative expenses increased by $0.5 million in the first nine months of 2021 compared to 2020, mainly due to additional legal fees for development projects, with an expected G&A of approximately $3.2 million for the remainder of 2021 [98] - The total number of employees and contractors at Sunrise Coal increased to 727 as of September 30, 2021, from 658 in the same period of 2020 [100] Coal Operating Margins - Operating margins from coal decreased by $10.8 million in the first nine months of 2021 compared to the same period in 2020, with margins at $7.70 per ton [93] Renewable Energy Development - The company plans to develop up to 1000 MW of renewable power, with 200 MW from solar and battery storage expected by 2025 [89]

Hallador Energy Company (NASDAQ:HNRG) Q2 2021 Results Conference Call August 10, 2021 2:00 PM ET Company Participants Becky Palumbo - Director, Investor Relations Larry Martin - Chief Financial Officer Brent Bilsland - President and Chief Executive Officer Conference Call Participants Matthew Key - B. Riley Securities Operator Good day, and welcome to the Hallador Energy Company Second Quarter 2021 Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentati ...