My COAL investing thesis is killing me. It's killing me because even though I've been hip to the the$is for several months now I've still managed to miss out on the GIGANTIC run made by COAL Stocks (over the past 3 months, BTU is up 72%...MEE is up 175%...PCX is up 250%...ANR is up 160% and ICO is up 120% !!!). Worse yet, I'm STILL having trouble deciding on which coal stock I want to own for the LONG TERM (at least 3-5 years) moving forward. Therefore, in an effort to temporarily clarify my often cluttered, investing mind I decided to take a Quick Look at 6 popular U.S. Coal Producers because I PASSIONATELY believe the EXPORT (International) component of their Earnings Growth is only going to gain traction (think $$$) in the midst of a new market reality/norm consisting of (over) $100 Crude OIL. (FYI, Please refer to my April 22nd post titled ' RTOB: No Coal For U.S.? ' for more of a background explanation on my current COAL investing thesis.) *COAL PLAYS BREAKDOWN :
1. Peabody Energy (BTU): $22 Billion mcap, 92 P/E, 15 F '08 P/E, 0.3% Div Yield
* Stock is Up 30% YTD, Up 63% YOY...4% OFF its 52 Week High
* Peabody is the largest private-sector coal company in the world; its coal is responsible for 10% of the total electricity generated in the U.S. and 2% of the total electricity generated worldwide (this is a large amount considering that 40% of the world's electricity is generated via coal power)
* As of December 31, 2007 BTU had 9.3 Billion tons of proven + probable Coal Reserves (3.3 Billion of which located in Wyoming's Powder River Basin)
* Sells Coal to over 340 electricity generating + industrial plants in 19 countries
* Operates a total of 31 mines out of the U.S. and Australia (BTU owns 11 mines in Australia w/ total provable reserves of around 1.1 Billion)
* During the year ended December 31, 2007, the Company sold 237.8 million tons of coal (59% or 139.8 million tons were produced/sold in Wyoming)
* On 10/31/07, BTU spun off portions of its Eastern U.S. mining operations to form Patriot Coal (PCX)
2. Arch Coal (ACI): $11 Billion mcap, 47 P/E, 13 F '08 P/E, 0.49% Div Yield
* Stock is up 63% YTD, Up 107% YOY...3% OFF its 52 Week High
* Arch Coal is the second-largest coal company in the U.S.; its coal is responsible for 6% of the electricity generated in the U.S., a large amount when considering that above 50% of U.S. electricity comes from coal power.
* ACI has 2.6 Billion tons of proven + probable Coal Reserves
* Operates 18 mines out of the U.S. (Wyoming, Colorado, Utah, West Virginia, Kentucky and Virginia)
* Sells Coal to power plants, steel mills and industrial facilities in the U.S.
* During 2007, the Company sold approximately 135 million tons of coal, including approximately 8.6 million tons of coal it purchased from third parties
* As of December 31, 2007, the Company had a sales backlog, including a backlog subject to price reopener or extension provisions, of approximately 377.5 million tons (almost 3 times its total sales in 2007).
3. Massey Energy (MEE): $7 Billion mcap, 70 P/E, 14 F '08 P/E, 0.22% Div Yield
* Stock is up 150% YTD, Up 229% YOY...3% OFF its 52 Week High
* MEE is the U.S.'s 4th largest coal producer by 2007 Sales
* MEE had 2.3 Billion tons of proven + probable Coal Reserves per a Dec 2005 SEC Filing
* Operates 47 mines out of the U.S. (West Virginia, Kentucky and Virginia)
* MEE generates sales through the mining, processing and selling of steam and metallurgical grade coal, as well as through other coal-related businesses, including the management of material handling facilities and a synfuel production plant.
* MEE's steam coal is primarily purchased by utilities and industrial clients as fuel for their power plants...MEE's metallurgical coal is used primarily to make coke for use in the manufacture of steel.
* During 2007, MEE sold 40 million tons of coal
4. Alpha Natural Resources (ANR): $7 Billion mcap, 138 P/E, 13 F '08 P/E, No Yield
* Stock is up 192% YTD, Up 380% YOY...6% OFF its 52 Week High
* ANR is the leading exporter of metallurgical coal from the U.S.
* ANR owns or leases about 617.5 million tons of Coal Reserves
* Operates out of 58 mines in the U.S. (Virginia, West Virginia, Kentucky, Pennsylvania)
* Sells steam and metallurgical coal + sold a total of 28.5 million tons in 2007
5. Patriot Coal (PCX): $4 Billion mcap, N/A P/E (IPO'd on 10/31/07), No Yield
* Stock is up 261% YTD, Up 325% since 10/31/07 IPO...7% OFF its 52 Week High
* Spun off (IPO'd) by Peabody Energy (BTU) on 10/31/07
* PCX has 1.3 Billion tons of proven + probable Coal Reserves (Patriot’s proven and probable coal reserves include coking coal, and medium and high-British thermal unit (Btu) steam coal, with low, medium and high sulfur content.)
* Operates 10 mines out of the U.S. (West Virginia, Virginia, Illinois and Kentucky)
* Sells coal to electric utilities, industrial users and metallurgical coal customers
* During the year ended December 31, 2007, the Company sold 22.1 million tons of coal, of which 77% was sold to domestic electric utilities and 23% was sold to domestic and global steel producers.
6. International Coal Corp. (ICO): $2 Billion mcap, N/A P/E, 22 F '08' P/E, No Yield
* Stock is up 135% YTD, Up 106% YOY...7% OFF its 52 Week High
* According to management estimates as of December 31, 2007, ICO owned or controlled approximately 316 million tons of metallurgical quality coal reserves and approximately 649 million tons of steam coal reserves.
* Operates 26 mines in the U.S. (Kentucky, Maryland, West Virginia and Illinois)
* During the year ended December 31, 2007, ICG sold 18.3 million tons of coal...Of the tons sold, 17.9 million tons were steam coal and 0.4 million tons were metallurgical coal.
* ICG's 3 largest customers during 2007 were: Georgia Power Company, Duke Energy Corporation and American Electric Power and derived approximately 43% of its coal revenues from sales to its five largest customers...Revenues from sales to Georgia Power Company accounted for more than 10% of coal revenues in 2007.
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Random
Thought
Of
Brilliance:
...After taking a closer look at the above companies I'm leaning towards PEABODY ENERGY (BTU) as my favorite Long Term Risk/Return COAL play for various Reasons INCLUDING:
1.) LARGEST NAME IN THE GAME --> BTU has the Largest proven Coal Reserves in the United States aka the 'Saudi Arabia of COAL' !...Below is a chart showing the WW Geographic Split/View on WHERE BTU's Coal Reserves are Located :
2.) DIVERSE, INTERNATIONAL PRESENCE --> BTU has the Largest International Presence with 11 mines and 1.1 Billion Reserves located in Australia (fyi, Australia is the WORLD's LARGEST Coal Exporter...Australia also boats the World's 5th Largest Reserves of COAL - Please refer to my 4/30/08 post titled 'REF - World's Largest Coal Reserves' for the List). As also mentioned above, Peabody's business is geographically DIVERSE and not limited to the U.S. as the company sells its coal to 340 customers located in 19 countries.
3.) SWEETSPOT LOCATION (WYOMING) --> BTU has the World's Largest exposure to Wyoming aka the 'Bread-Basket of COAL' ! (FYI, for more info regarding the significance of Wyoming to U.S. Coal Reserves please refer to my June 21st post titled 'REF - U.S.'s Coal Production + Wyoming' ).
4.) RELATIVE VOLATILITY + TIMING --> As the largest U.S. coal producer this stock should trade + act less volatile than its much smaller peers noted above...BTU's mere 63% year over year gain PALES in comparison to some of the much smaller (and therefore more speculative) players like PCX and ANR which are up over 300% from July/Oct 2007! I'm hesitant to invest or recommend PCX and ANR because they've already had substantial runs...Who knows how much upside is left in these smaller names ? More importantly, given the market's recent volatility, who says these small cap stocks can't get knocked down for a quick 50% in the next 6 months ??? I like BTU because its actually up LESS than 100% year over year (imagine that), therefore its short-term downside should be a whole lot less vs. the other, smaller and more speculative players.
Data Courtesy: Reuters + Google Finance
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