Hallador Energy pany(US:HNRG)2021-03-10 00:14Financial Data and Key Metrics Changes - Hallador Energy incurred a net loss of $4.7 million for Q4 2020, equating to a loss of $0.15 per share, and a total annual loss of $6.2 million or $0.20 per share [6] - Free cash flow for Q4 was $2.9 million, while for the year it was $27.6 million [6] - Adjusted EBITDA was $9.4 million for the quarter and $53.5 million for the year [6] - Bank debt decreased by $9.2 million in Q4 and $42.4 million for the year, with total bank debt at $137.7 million as of December 31, 2020 [6] Business Line Data and Key Metrics Changes - Shipments for the quarter were 1.6 million tons, with coal inventories reduced year-over-year by $2.8 million [10] - Cost per ton increased slightly to $31.07 in 2020 from $30.69 in 2019, while Oaktown costs rose to $29.84 from $28.35 [10] Market Data and Key Metrics Changes - The forward strip on natural gas prices increased by 44% year-over-year [12] - Illinois Basin utility inventory levels returned to 48 days of full load burn, down from the low 60s in May 2020 [12] Company Strategy and Development Direction - Hallador is focused on debt reduction, having paid down $42.4 million of bank debt, representing 24% of outstanding debt [9] - The company anticipates a return to lower operational costs in 2021, projecting costs to return to the lower end of $29 to $30 per ton [11] - The management believes coal will continue to play an important role in supporting the grid for many decades, despite the transition to carbon-free electricity [13][22] Management's Comments on Operating Environment and Future Outlook - Management noted that the global pandemic caused significant disruptions in energy markets, but Hallador demonstrated resilience with strong operating cash flow of $52.6 million [9] - The company expects coal sales to be stronger in 2022 compared to 2021, driven by customer demand and mine closures [17] - Management highlighted the importance of maintaining baseload power plants, such as coal plants, to ensure reliable electricity supply [13][22] Other Important Information - Hallador received a $10 million loan under the Paycheck Protection Program, which is expected to be forgiven [9] - The company has built a rail facility in Princeton, Indiana, designed to store coal for customers if needed [43] Q&A Session Summary Question: What is the outlook for coal burn this year and next year? - Management indicated that coal inventory levels have been declining and the market has improved, expecting stronger sales in 2022 compared to 2021 [17] Question: Is there an increased appetite for M&A in the current environment? - Management believes continued M&A efforts will occur as the market gets smaller, with a focus on consolidating high-cost production to low-cost production [18] Question: What is the analysis on natural gas prices and their impact on coal competitiveness? - Management noted that natural gas prices have risen significantly, which will likely lead to increased coal burn as coal plants become more competitive [21] Question: Can the company flex production up, and what is the marginal cost? - The company can flex production up to over 8 million tons, with incremental costs expected to be negative as costs would decrease with higher production [24] Question: Why are contracted prices lower this year despite rising natural gas prices? - Contracts for 2021 were entered into before the increase in natural gas prices, which is why they are lower [42] Question: Any updates on the storage facility in Indiana? - The facility is designed and permitted for coal storage but currently does not have any coal stored for customers [43]