Peabody Energy (NYSE:BTU) narrowed its third-quarter loss as stronger seaborne coal prices and higher production helped offset geological problems at its Centurion mine, where the company reduced its fourth-quarter sales outlook.
The coal producer reported a net loss attributable to common stockholders of $32.8 million, or $0.27 per diluted share, compared with a loss of $90.6 million, or $0.74 per share, in the second quarter. Adjusted EBITDA rose to $97.5 million, and each operating segment generated positive adjusted EBITDA, executives said.
Chief Financial Officer Mark Spurbeck said the improvement reflected higher production at Centurion, higher average realized seaborne prices and better U.S. thermal volumes. Costs per ton were nevertheless higher than anticipated because of lower-than-expected U.S. thermal volumes and difficult mining conditions at Centurion.
Centurion faces faulting delays
President and CEO Jim Grech said Centurion met its third-quarter sales target, but the longwall encountered multiple complex geological structures late in the quarter and into October. Production in October was just over 45,000 tons, and Peabody revised its fourth-quarter sales expectation to 300,000 to 500,000 tons.
Grech said the faulting was known but proved more complex than the mine plan had assumed. Mechanical downtime while the longwall navigated faulted areas allowed ground pressure and roof conditions to develop ahead of the face, further slowing progress.
About 110 meters remained before the major fault structure would be behind the longwall, although Grech said some geological interruptions were still expected through the rest of the panel. He said the company did not view the challenges as a resource quality, reserve or long-term mine plan issue.
Peabody plans two upgrades to the longwall shields: a base lift power increase costing an estimated $1.5 million to $2 million in total, to be completed during scheduled maintenance in the current panel, and shield extension flipper improvements costing an estimated $5 million to $10 million, to be installed during the next longwall move in 2027. The company also plans to stabilize ground ahead of faulted areas in the next panel.
During the question-and-answer session, Grech said he remained confident Centurion would reach full capacity. He said the mine could reach high run rates after passing the current faulted area, but the modifications would be needed to sustain those rates consistently. Spurbeck said Peabody would provide 2027 guidance on its next call and that its long-term view of Centurion’s costs had not changed.
Seaborne markets support results
Chief Commercial Officer Malcolm Roberts said seaborne coal prices strengthened during the quarter amid supply constraints and steady demand. Premium hard coking coal averaged $248 per metric ton, up 35% from a year earlier, while Newcastle thermal coal averaged about $135 per ton and ended the quarter above $145.
Roberts attributed tighter metallurgical coal supply in part to Chinese safety inspections and production restrictions following a major mine accident in May. He said supply was expected to remain constrained into 2027. Thermal coal prices benefited from elevated liquefied natural gas prices, slower Chinese production and lower Indonesian exports, he said.
Peabody’s seaborne thermal segment shipped 3.1 million tons and generated $65.5 million in adjusted EBITDA, up 26% from the second quarter and 60% from a year earlier. Seaborne metallurgical shipments totaled 2.2 million tons. That segment posted its first positive EBITDA quarter of the year, although costs were above target at $162 per ton.
U.S. thermal operations generated $40.5 million in adjusted EBITDA, more than double the second-quarter result. Powder River Basin shipments rose to 19.6 million tons, but sales were below guidance as cooler weather, renewable generation, low natural gas prices and an extended customer plant outage weighed on demand.
Fourth-quarter outlook and balance sheet
For the fourth quarter, Peabody expects seaborne thermal shipments of 3.6 million to 3.8 million tons, including 2.5 million to 2.7 million export tons, at costs of $46 to $51 per ton. The company raised its full-year seaborne thermal export volume guidance by 200,000 tons.
It forecast seaborne metallurgical shipments of 2.2 million to 2.4 million tons at costs of $150 to $160 per ton. Lower expectations at Centurion prompted a 600,000-ton reduction in full-year seaborne metallurgical volume guidance and a $15-per-ton increase in expected costs, Spurbeck said.
Peabody also lowered its full-year Powder River Basin volume guidance by 7.5 million tons and its other U.S. thermal volume guidance by 200,000 tons, citing lower anticipated coal burn. Capital expenditure guidance was reduced by $40 million, primarily because of a deferral of development at Centurion North.
The company ended the quarter with $434 million in cash and $887 million in liquidity. Spurbeck said Peabody had returned $192 million to shareholders through September 30, including $27.4 million in cash dividends.
Beyond coal operations, Grech said Peabody was nearing agreements with a customer and processing partner related to germanium. The company is also advancing solar and battery storage projects on reclaimed mine land through a joint venture with RWE and exploring potential partnerships for mine-mouth power generation and data centers.
About Peabody Energy (NYSE:BTU)
Peabody Energy Corp. is a global coal producer and supplier of energy and industrial fuels. The company mines, processes and markets thermal coal, which is primarily used for electricity generation, and metallurgical coal, which is used in steelmaking. Peabody also provides coal-trading and logistics services and works with customers to transport products to domestic and international markets.
Peabody operates mines in the United States and Australia, serving electric utilities, steel producers and other industrial customers.
