Massey Energ (MEE)
Q3 2010 Earnings Call
October 27, 2010 11:00 am ET
Baxter Phillips - President, Executive Director, Member of Finance Committee and Member of Safety, Environmental & Public Policy Committee
Previous Statements by MEE
» Massey Energ Q2 2010 Earnings Call Transcript
» Massey Energy Company Q1 2010 Earnings Call Transcript
» Massey Energy Q4 2009 Earnings Call Transcript
Don Blankenship - Chairman of the Board, Chief Executive Officer, Chairman of Executive Committee, Chairman of the Board of A T Massey, Chief Executive Officer of A T Massey and President of A T Massey
Eric Tolbert - Chief Financial Officer and Vice President
Roger Hendriksen - Vice President of Investor Relations
Shneur Gershuni - UBS Investment Bank
Michael Dudas - Jefferies & Company, Inc.
David Khani - FBR Capital Markets & Co.
Jeremy Sussman - Brean Murray, Carret & Co., LLC
Good morning, everyone and welcome to the Massey Energy's Third Quarter 2010 Earnings Conference Call. [Operator Instructions] Roger Hendriksen, Massey Energy's Vice President of Investor Relations, will now provide opening remarks. Please go ahead, Mr. Hendriksen.
Thank you, Nathania. Good morning, everyone, and thanks, for taking the time to join our call this morning. We appreciate your continuing interest in Massey Energy Co. As you know, we distributed our third quarter press release after market closed last night, and if by chance, any of you have not seen it, it is posted in our website and has been furnished to the SEC on Form 8-K.
The members of our management team who will be speaking with you today are our Chairman and Chief Executive Officer, Don Blankenship; our President, Baxter Phillips; and our Chief Financial Officer, Eric Tolbert.
Before we begin, I need to remind you that the statements made in this presentation, which are not historical in nature are forward-looking statements, made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on current factual information or certain assumptions, which management currently believes to be reasonable. Financial and operational results for future periods may differ materially from current management projections, as a result of factors outside the company's control.
Information concerning those factors is available in the company's 2009 annual report on Form 10-K and other periodic filings with the SEC. In providing projections and other forward-looking statements, the company does not make and specifically disclaims any undertaking or obligation to update them.
With those formalities out of the way, I'll turn the call over to Baxter Phillips.
Good morning, and thank you for joining us. Planning productivity in the third quarter continue to be hampered by issues related directly or indirectly to the UBB tragedy. Specifically, increased inspection activity and more stringent enforcement actions by MSHA, led to disruption of operations and lost ships. In total, approximately for 450 ships were lost during the quarter due to regulatory issues.
Nearly 30% of these were due to delays in the approval process for ventilation or other mine plant changes. We estimate that the lost ships reduced our plant production by approximately 230,000 tons. In addition, and consistent approval or denial of the use of scrubber technology and continuous miner sections, has forced shorter cuts and increased equipment moves that lower productivity, and in our view, increased the risk of accident and injury. As a result of MSHA's new policies, we believe some of our older mines with more extensive underground works may need to be idle as they become impractical to operate.
Needless to say, management focus and attention continue to be distracted, as the management team supported the federal investigation at UBB. As a result of these issues, productivity is measured in feat of advance per shift in underground mines, declined by 16% in the third quarter of 2010, as compared to the first quarter of 2010 prior to the UBB accident. Production costs per ton in the underground mines increased by 13% over the same period.
In response to the decreased productivity, we have refocused management and production numbers on training and efficiency improvements. Chris Adkins, our Chief Operating Officer was until recently, spending all of his time on activities related to UBB. He is now able to focus more of his attention on mining productivity. To assist him, Chris has promoted Jason Whitehead to be Vice President of Underground Operations. Jason will work directly with Chris, focusing on mines that are not meeting our productivity standards.
As a result, we have seen productivity stabilized and improved slightly each month during the third quarter. More significantly, underground productivity during the first three weeks of the fourth quarter was up by approximately 10% over the third quarter average. We expect future production to be aided by the recommencement in September of the Revolution's longwall mine and the recommencement of operations in mid-October at the Sprouse Creek preparation plant, which has recently been modernized. The Revolution longwall mine has the capacity to produce approximately 1 million tons of metallurgical coal annually. The mines feeding this Sprouse Creek facility, provide approximately 400,000 tons of additional annual production capacity, most of which is also metallurgical coal.
More underground sections that can be in this facility may be added in the near future. We also anticipate the startup of the Zigmond processing facility in early December, which should add approximately 1.2 million tons of annualized met coal production capacity. At this time I'll turn the call over to Eric for a discussion of our financial details for the quarter.
Thank you, Baxter. For the third quarter of 2010, we reported a net lost of $41.4 million or a lost of $0.41 per diluted share. The net results included pretax charges of $14.5 million related to the UBB tragedy. Excluding these UBB charges, we reported a net lost of $33.8 million or a lost of $0.33 per share. This compared to net income of $16.5 million or $0.19 per diluted share in the third quarter of 2009.