UPDATE 2-Coal miner Peabody cuts capex range; bullish long-term

Fri Sep 7, 2012 2:22am IST

Related Topics

Stocks

   

* Narrows 2012 capex to $1 bln-$1.1 bln from $1 bln-$1.2 bln

* CEO bullish on coal's long-term outlook

* Stock closes slightly higher

Sept 6 (Reuters) - Coal miner Peabody Energy Corp, which has lowered its production targets for this year in the face of weak demand and slumping prices, cut the top end of its 2012 capital expenditure budget range on Thursday.

But Chairman and Chief Executive Greg Boyce was bullish about longer-term prospects for coal and said the company targeted a production boost from its Australian mines.

"The data and the facts do not support the idea that coal is in long-term decline," he told analysts at a Barclays energy conference in New York.

However, responding to the current market dynamics which have seen weak demand drive down prices and producers cut production, Boyce said Peabody was narrowing its capital expenditure budget for a third time this year.

He said the St. Louis-based company now expected to spend $1 billion to $1.1 billion this year - down from a previous range of $1 bil1ion to $1.2 billion. In April it had lowered the 2012 budget to $1.1 billion to $1.3 billion, from $1.2 billion to $1.4 billion at the start of the year.

Boyce said Peabody expected 2013 capital spending to be at or below 2012 levels.

"We have reduced capex three times this year to make us more flexible to market conditions," said Boyce, whose comments were monitored via webcast.

Analyst Lucas Pipes of Brean Murray Carret & Co said: "Coal markets are weak and it may be prudent to hold off on growth projects until prices improve."

Boyce said Peabody was sticking with its estimates of 185 million to 195 million tons of U.S. coal production in 2012 and 31 million to 34 millions tons from its Australian mines.

But those estimates had already been reduced during the year from 195 million to 205 million U.S. tons and 33 million to 36 million Australian tons.

Boyce said that as part of its integration of Macarthur Coal Ltd, which it acquired last year, Peabody planned to convert 75 percent of its Australian production to owner-operated rather than operated by contractors.

"We were disappointed by the contractor performance," he said. Profit margins at Peabody's Australian operations fell by more than half in the second quarter of 2012, when the company's earnings fell short of Wall Street expectations.

On Thursday, Boyce said Peabody is targeting an increase in Australian production to 40 million tons per year in 2015, to benefit from increased export opportunities in Pacific markets. Australia already supplies 60 percent of all exports of steelmaking metallurgical coal, he said.

Boyce said despite recent weakness, he was optimistic about the longer-term prospects for coal, especially in China.

He noted 70 gigawatts of new coal-generated electricity was expected to come on line in India in the next five years, which would require an extra 250 million tons of coal.

Earlier on Thursday, sources in Australia told Reuters that Peabody had deferred the $500 million sale of its Wilkie Creek mine in Queensland. But Peabody spokesman Vic Svec said the sales process was still under way and Peabody was talking with interested parties.

Peabody shares closed 0.9 percent higher at $21.40 on the New York Stock Exchange.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Photo

RBI Policy Review

RBI keeps rates on hold, warns on inflation  Full Article 

China iPhone Sale

China iPhone Sale

China regulator approves Apple's iPhone 6 for sale in China  Full Article 

Cleanliness Drive

Cleanliness Drive

Modi orders officials to clean loos on Gandhi's birthday.  Full Article 

Jaitley's Health

Jaitley's Health

Finance Minister Jaitley in isolation ward, may skip U.S. trip.  Full Article 

China Factory

China Factory

China final HSBC PMI steady in September on stronger global demand but risks remain  Full Article 

Vadodara Violence

Vadodara Violence

Police arrest 140 for religious clashes in Vadodara as Modi tours U.S.  Full Article 

Japan Economy

Japan Economy

Economy takes another hit as spending, factory output fall  Full Article 

AIG Bailout

AIG Bailout

Six years after AIG bailout, trial asks: was it legal?  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage