This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Alpha Natural Needs to Get Hot Again in a Cold Coal Market

Stocks in this article: ANR RICE

Metallurgical coal spot prices are related more to the Asian hard met coal benchmark assessments than other met coal markets. Therefore, to reduce its exposure to spot price volatility, Alpha Natural is selling more volume of met coal in North America from 2013. The company has already sold more than six million tons of met coal in North America and these volumes were priced during the fourth quarter of last year. An increase in North America business will help the company mitigate spot price volatility to some extent.

Along with reducing its exposure to the spot rate, the company is also taking cost reduction initiatives. Last year its annual cost reduced by $150 million, and this year it expects to reduce cost by another $200 million. These reductions are mainly concentrated towards cost of sales.

In 2013, Alpha Natural's cost of sales for the Eastern region, where it produces met coal, reduced to $71.40 per ton from $73.77 in 2012. This year, it expects to reduce costs to $67 per ton. Lower cost will help the company improve its margin in the current low met coal price environment.

Also, Alpha Natural entered a new joint venture to develop its Marcellus position of approximately 10,000 net acres. The company hasn't the revealed name of the joint venture partner and other details, but analysts expect the new joint venture could be structured similar to Alpha Natural's successful joint venture with Rice Energy (RICE).

The growth prospects from this deal include its combined platform of about 43,551 net acres in the Marcellus region, where natural gas production is growing, and 48,660 net acres in Ohio's Utica Shale, which is still in development stage but initial test results are expected in the second quarter of this year. With development of Utica Shale acreage, the company's production will further increase, which will provide a potential upside to its revenue.

The joint venture with Rice Energy helped Alpha Natural develop a portion of its Marcellus assets, and it created good value for the company. With this new joint venture, the company can unleash similar potential from its remaining Marcellus acreage.


At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs