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Rhino results

Published by
World Coal,

Rhino Resource Partners LP announced today its financial and operating results for the quarter ended 31 December 2014. For the quarter, the Partnership reported a net loss of US$61.3 million and Adjusted EBITDA of US$2.2 million, compared to net income of US$0.8 million and Adjusted EBITDA of US$16.1 million in the fourth quarter of 2013. Approximately US$45.3 million of asset impairment and related charges impacted the net loss for the quarter ended 31 December 2014, as well as an additional US$5.9 million impairment charge related to the Rhino Eastern joint venture investment. Diluted net loss per common unit was US$2.07 for the quarter compared to diluted net income per unit of US$0.03 for the fourth quarter of 2013. Total revenues for the quarter were US$61.9 million, with coal sales generating US$52.5 million of the total, compared to total revenues of US$62.7 million and coal revenues of US$52.7 million in the fourth quarter of 2013. (Refer to "Reconciliations of Adjusted EBITDA" included later in this release for reconciliations to the most directly comparable GAAP financial measures).

On 20 January 2015, the Partnership announced it was maintaining a cash distribution of US$0.05 per common unit, or US$0.20 per unit on an annualised basis. This distribution was paid on 13 February 2015 to all common unit holders of record as of the close of business on 30 January 2015. No distribution was paid on the subordinated units.

Joe Funk, President and Chief Executive Officer of Rhino's general partner, stated, "Our board maintained the distribution at its current level preserving the liquidity of the Partnership as the prolonged weakness in the coal markets continues to adversely impact cash flow. We continue to adjust our production and cost structure to align with current market conditions. In the fourth quarter, we performed a comprehensive review of our current coal mining operations as well as potential future development projects. We identified various properties, projects and operations that were uneconomical to pursue or maintain due to the changes in our strategic plans, market conditions or other factors. Based upon these ongoing reviews and changes in our strategic plans, we recorded approximately US$45.3 million in non-cash asset impairments and related charges during the quarter, as well as an additional US$5.9 million impairment charge related to our Rhino Eastern joint venture. We believe these actions along with our continuing focus on cost and productivity improvements at our ongoing core operations will enhance the liquidity of Rhino while retaining the flexibility to continue exploring non-coal investments, which we believe will enhance the long-term value of the Partnership. For the first quarter of 2015, we expect Adjusted EBITDA from continuing operations to be approximately US$4.0 million, which is an improvement over the fourth quarter results.

Our priorities for 2015 will be to preserve liquidity, continue controlling cost, only pursue capital spending with strong justification, and maintain our excellent safety record, all while responding quickly to changing and challenging market conditions. Our balance sheet remains strong with relatively low debt levels and low legacy liabilities.

Since completing the sale of our Utica oil and gas interests, we have kept debt levels relatively low with approximately US$54 million drawn on the bank line of credit at the end of the quarter compared to US$167 million at the same point last year. We currently have no significant planned growth capital expenditures and the investments to develop Pennyrile are nearing completion. We anticipate cash flow to grow at Pennyrile, and expect costs to improve at Hopedale.

During the fourth quarter, the difficult market conditions that continue to affect nearly all coal companies adversely impacted our results. Conditions remained weak in all served markets, with excess supply and low natural gas prices weighing heavily on coal. At Hopedale, poor rail service continued to constrain shipments from this operation while costs remained high due to intermittent adverse geological conditions encountered in the advancement to the new 7-seam reserve. In addition, productivity was lower and costs were higher than anticipated at our new Pennyrile mine due to coal processing issues and geological conditions that we are working through as the mine continues its ramp up. Sales volumes were strong during the quarter at our Castle Valleyoperation and we have completed additional long-term sales agreements through 2016 for coal from this operation.

Our Pennyrile mine ramped up production during the fourth quarter and shipments were made to fulfil our base 800 000 t per year contract. We are in the final stages of completing a long-term sales contract with another local utility customer for 120 000 t in 2015, 400,000 tons in 2016 and 550,000 tons in 2017. We have added a second mining section at Pennyrile to increase production capacity to fulfil the long-term sales contracts. We received permission for a deep cut mining plan, which will help lower costs. Pennyrile gives us additional diversification and we expect it to be a significant generator of stable cash flow as it ramps up to its full potential run rate of two million tons per year.

Our Castle Valley operation is sold out through 2016 while our Hopedale and Sands Hill operations in Northern Appalachia are sold out for the remainder of 2015. At Pennyrile, additional test burns may lead to additional sales contracts, which could bring this mine to its potential full run rate of two million tons per year. Market conditions in Central Appalachia have remained challenging with continued depressed met and steam coal prices weighing on producers. In Central Appalachia, we have remained focused on safe operations while keeping costs as low as possible with reduced levels of production and sales."

Further, Mr. Funk stated "We dissolved the Rhino Eastern joint venture in January 2015 due to ongoing weakness in the metallurgical coal market, which had caused the joint venture to be unprofitable and a source of significant cash outflow for us. We anticipate the divestiture of the Rhino Eastern joint venture will improve the Partnership's cash flow by approximately US$6 million in 2015."

Adapted from press release by Joe Green

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