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Foresight Energy LP Reports Third Quarter 20181 Results

November 7, 2018

ST. LOUIS--(BUSINESS WIRE)--Nov 7, 2018--Foresight Energy LP (“Foresight” or the “Partnership”) (NYSE:FELP) today reported financial and operating results for the third quarter ended September 30, 2018. Foresight generated coal sales revenues of nearly $292 million on sales volumes of 6.1 million tons resulting in a net loss attributable to limited partner units of $27.7 million, Adjusted EBITDA of $57.6 million, and cash flows from operations of $51.3 million. Net loss attributable to limited partner units and Adjusted EBITDA include $25 million in charges related to the settlement of litigation with Natural Resource Partners L.P. (“NRP”) related to matters at Hillsboro Energy and Macoupin Energy.

“During the third quarter, we continued to take advantage of a strong export market and an improved domestic spot market to realize significant year-over-year improvements in our sales volumes,” said Mr. Robert D. Moore, Chairman, President and Chief Executive Officer. “With our unique access to international and domestic markets, plus our industry-leading cost structure, Foresight remains well-positioned to continue to opportunistically place its thermal coal production and to capture solid margins. Regarding the settlement of litigation with NRP, we are pleased to have reached a mutually beneficial resolution to these lawsuits, which provides us with future operational flexibility at Hillsboro Energy, while significantly reducing the lease holding cost.”

Foresight also announced that due to the Partnership’s operating performance during the third quarter, the Board of Directors of its General Partner approved a quarterly cash distribution of $0.0565 per unit from retained excess cash flow. The distribution is payable on December 21, 2018 for unitholders of record on December 11, 2018.

Third Quarter Consolidated Financial Results

Coal sales totaled nearly $292.0 million for the third quarter 2018 compared to $229.7 million for the third quarter 2017, representing an increase of $62.3 million, or 27%. The increase in coal sales revenues was due to higher coal sales volumes combined with higher coal sales realization per ton sold. Coal sales volumes and coal sales realization per ton sold were higher due to increased export sales, which experienced more favorable API2 pricing during 2018.

Cost of coal produced was $133.7 million, or $22.28 per ton sold, for the third quarter 2018 compared to $122.8 million, or $23.43 per ton sold, for the third quarter 2017. The increase in total cost of production was due to an increase in produced tons sold offset by a lower cash cost per ton sold. The lower cash cost per ton sold resulted from no longwall moves occurring during the third quarter of 2018, compared to one longwall move in the prior year period. Additionally, cost of coal produced (excluding depreciation, depletion and amortization) for the third quarter of 2017 included $4.3 million arising from the non-cash adjustment of inventory to fair value related to the application of pushdown accounting.

Transportation costs increased approximately $21.8 million from the third quarter 2017 to the third quarter 2018 due to a higher percentage of sales going to the export market during the current year period and the additional transportation and transloading costs associated therewith.

Other operating (income) expense, net for the third quarter 2018 includes $25.0 million in charges related to the settlement of litigation with NRP related to matters arising from the combustion event at Hillsboro Energy and royalty matters at Macoupin Energy. While the matters with NRP are settled, Foresight remains in discussions with its insurance providers regarding further potential recoveries under its policies related to the Hillsboro Energy combustion event; however, there can be no assurances that Foresight will receive any further insurance recoveries related to the Hillsboro combustion event.

During the third quarter 2018, Foresight generated operating cash flows of $51.3 million and ended the period with $43.1 million in cash and $129.7 million of available borrowing capacity, net of outstanding borrowings and letters of credit, under its revolving credit facility. Capital expenditures for the quarter ended September 30, 2018 totaled $18.6 million compared to $15.2 million for the quarter ended September 30, 2017.

Guidance for 2018

Based on Foresight’s remaining contracted position, third quarter and year-to-date performance, and its current outlook on pricing and the coal markets in general, the Partnership is affirming and updating the following guidance for 2018:

Sales Volumes – Based on current committed position and expectations for the remainder of 2018, Foresight is projecting sales volumes to be between 22.4 and 23.0 million tons, with approximately 9.0 million tons expected to be sold into the international market.

Adjusted EBITDA – Based on the projected sales volumes and operating cost structure, Foresight currently expects to generate Adjusted EBITDA in a range of $305 to $325 million.

Capital Expenditures – Total 2018 capital expenditures are estimated to be between $70 and $77 million.

Forward-Looking Statements

This press release contains “forward-looking” statements within the meaning of the federal securities laws. These statements contain words such as “possible,” “intend,” “will,” “if” and “expect” and can be impacted by numerous factors, including risks relating to the securities markets, the impact of adverse market conditions affecting business of the Partnership, adverse changes in laws including with respect to tax and regulatory matters and other risks. There can be no assurance that actual results will not differ from those expected by management of the Partnership. Known material factors that could cause actual results to differ from those in the forward-looking statements are described in Part I, “Item 1A. Risk Factors” of the Partnership’s Annual Report on Form 10-K filed on March 7, 2018. The Partnership undertakes no obligation to update or revise such forward-looking statements to reflect events or circumstances that occur, or which the Partnership becomes aware of, after the date hereof.

Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP supplemental financial measure that management and external users of the Partnership’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

The Partnership defines Adjusted EBITDA as net income (loss) attributable to controlling interests before interest, income taxes, depreciation, depletion, amortization and accretion. Adjusted EBITDA is also adjusted for equity-based compensation, losses/gains on commodity derivative contracts, settlements of derivative contracts, a change in the fair value of the warrant liability and material nonrecurring or other items, which may not reflect the trend of future results. As it relates to commodity derivative contracts, the Adjusted EBITDA calculation removes the total impact of derivative gains/losses on net income (loss) during the period and then adds/deducts to Adjusted EBITDA the amount of aggregate settlements during the period. Adjusted EBITDA also includes any insurance recoveries received, regardless of whether they relate to the recovery of mitigation costs, the receipt of business interruption proceeds, or the recovery of losses on machinery and equipment.

The Partnership believes the presentation of Adjusted EBITDA provides useful information to investors in assessing the Partnership’s financial condition and results of operations. Adjusted EBITDA should not be considered an alternative to net (loss) income, operating income, cash flow from operations, or any other measure of financial performance presented in accordance with U.S. GAAP, nor should Adjusted EBITDA be considered an alternative to operating surplus, adjusted operating surplus or other definitions in the Partnership’s partnership agreement. Adjusted EBITDA has important limitations as an analytical tool because it excludes some, but not all, of the items that affects net (loss) income. Additionally, because Adjusted EBITDA may be defined differently by other companies in the industry, and the Partnership’s definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, the utility of such a measure is diminished. For a reconciliation of Adjusted EBITDA to net loss, please see the table below.

This press release references forward-looking estimates of Adjusted EBITDA projected to be generated by the Partnership during the year ending December 31, 2018. A reconciliation of estimated 2018 Adjusted EBITDA to U.S. GAAP net income (loss) is not provided because U.S. GAAP net income (loss) for the projection period is not practical to assess due to unknown variables and uncertainty related to future results. In recent years, the Partnership has recognized significant asset impairment charges, transition and reorganization costs, losses on early extinguishment of debt, and debt restructuring costs. While these items affect U.S. GAAP net income (loss), they are generally excluded from Adjusted EBITDA. Therefore, these items do not materially impact the Partnership’s ability to forecast Adjusted EBITDA.

About Foresight Energy LP

Foresight is a leading producer and marketer of thermal coal controlling over 1.7 billion tons of coal reserves in the Illinois Basin. Foresight currently operates two longwall mining complexes with three longwall mining systems (Williamson (one longwall mining system) and Sugar Camp (two longwall mining systems), one continuous mining operation (Macoupin) and the Sitran river terminal on the Ohio River. Foresight’s operations are strategically located near multiple rail and river transportation access points, providing transportation cost certainty and flexibility to direct shipments to the domestic and international markets. Foresight also owns coal interests and mining assets located in southeastern Ohio.

1 Foresight adopted pushdown accounting as of March 31, 2017 as a result of Murray Energy obtaining control of its general partner. As required by pushdown accounting, the Partnership revalued its balance sheet on the change of control date and therefore certain financial statement line items are not comparable to prior periods. As such, operational results prior to March 31, 2017 were recorded on the predecessor financial statements (the “Predecessor”). Operational results subsequent to March 31, 2017 were recorded on the successor financial statements (the “Successor”).

View source version on businesswire.com:https://www.businesswire.com/news/home/20181107005257/en/

CONTACT: Foresight Energy LP

Cody E. Nett, 740-338-3100

Corporate Secretary and Director of Media and Investor Relations

Investor.relations@foresight.com

Media@coalsource.com

KEYWORD: UNITED STATES NORTH AMERICA MISSOURI

INDUSTRY KEYWORD: ENERGY COAL NATURAL RESOURCES MINING/MINERALS

SOURCE: Foresight Energy LP

Copyright Business Wire 2018.

PUB: 11/07/2018 06:30 AM/DISC: 11/07/2018 06:30 AM

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