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Oxford Resource Partners, reports Q3 2014 financial results

World Coal,

Legal settlement proceeds of US$ 19.5 million have helped bump up the margins for Oxford Resource Partners over Q3 2014.

Adjusted EBITDA was US$ 26.9 million for Q3 2014, compared to US$ 11.0 million for Q3 2013. The legal settlement compensated the partnership for lost profits on coal sales, resulting from the wrongful termination of a coal supply agreement with a former customer. Cash coal sales revenue also increased 2.8% to US$ 52.16/t over Q3 2014.

However, lower volumes of coal and higher costs of transportation, diesel fuel and employee compensation also impacted the company’s bottom line. Cash cost of coal sales increased by 4.4% to US$46.29/t. Cash margins decreased 8.3% to US$ 5.87/t.

Net income was US$ 9.4 million Q3 2014 compared to a net loss of US$ 5.1 million for Q3 2013. However, excluding the significant legal settlement saw the company report an Adjusted Net Loss of US$ 10.3 million for Q3 2014.

"The mild summer weather adversely impacted our third quarter sales results. Customer stockpiles have been near capacity, resulting in delayed shipments," said Oxford's president and CEO, Charles Ungurean. "We anticipate that volumes will return to more normal levels in the fourth quarter."

"Oxford is very excited about the recently announced transactions with Westmoreland Coal Company," Ungurean continued. "Their proposed acquisition of our general partner and a substantial percentage of our limited partnership, together with our restructuring and Westmoreland's contribution of revenue enhancing assets, will create significant opportunities for our public unitholders, including the reinstatement of cash distributions. Oxford will become the MLP vehicle for Westmoreland, to which it intends to continue to contribute MLP-appropriate assets, allowing Westmoreland to realise additional value for its shareholders as well. This is a great opportunity for both companies and we are thrilled to be joining with Westmoreland."

Westmoreland transactions

Westmoreland Coal Company will acquire Oxford GP and contribute certain royalty bearing coal reserves to the Partnership in return for common units of the Partnership.

The transactions must first be approved by shareholders and a vote is due to be held in December. Oxford expects transactions will be completed during Q4 2014.

Agreement with Harrison and CONSOL

The Partnership's wholly owned subsidiary, Oxford Mining Company (OMC), entered into an agreement with Harrison Resources, LLC and CONSOL of Ohio LLC, under which Harrison redeemed all of CONSOL's interest in Harrison. Harrison had been a joint venture owned 51% by OMC and 49% by CONSOL, and as a result of the redemption, OMC owns 100% of Harrison.  Harrison acquired 876,000 t of coal reserves from a CONSOL affiliate and also options to purchase an aggregate of 5.6 million additional t of coal reserves from a CONSOL affiliate. These tonnages are in addition to the 1.7 million t of coal reserves already owned by Harrison.

2014 guidance

The Partnership provides the following updated guidance for 2014 based on its current industry outlook:

The Partnership expects to produce between 5.6 million t and 5.7 million t and sell between 5.7 million t and 5.8 million t of thermal coal. The average selling price is anticipated to be in the range of US$ 52.25/t – US$ 52.75/t, with an anticipated average cost in the range of US$ 45.35/t – US$ 45.85/t.

Adjusted EBITDA is expected to be in the range of US$ 53.5 million to US$ 56.5 million, including the $19.5 million of legal settlement proceeds.

The Partnership anticipates capital expenditures of between US$ 19 million and US$ 20 million.

Written by Sam Dodson

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