Hallador Energy pany(HNRG) - 2021 Q3 - Earnings Call Transcript

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]