Oxford Resource Partners' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Oxford Resource Partners, LP (OXF)

Q2 2012 Earnings Call

August 7, 2012 10:00 AM ET


Karen Brown – IR

Chuck Ungurean – President and CEO

Greg Honish – SVP, Operations

Jeff Gutman – SVP, CFO and Treasurer


David Feaster – Raymond James

Ron Londe – Wells Fargo


Good day ladies and gentlemen and welcome to the Oxford Resource Partners, LP earnings conference call. My name is Jasmine and I will be your coordinator today. At this time all participants are on a listen only mode. We will be facilitating a question-and-answer session before the end of today’s conference.

(Operator Instructions)

As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s conference, to Miss Karen Brown. You may proceed ma`am.

Karen Brown

Thanks Jasmine. Hello and welcome everyone to our second quarter 2012 earnings conference call. We appreciate your continued interest in Oxford Resource Partners. I’m Karen Brown, Investor Relations Representative with Oxford. Participating on the call today are Oxford’s President and CEO, Chuck Ungurean, Oxford’s Senior Vice President of Operations Greg Honish and Oxford’s Senior Vice President and CFO Jeff Gutman. Oxford released its second quarter results earlier this morning and we will now review these results in more detail.

Following our prepared remarks we’ll open this call out to your questions. On today’s call we’ll be discussing our financial results for the second quarter including an update on strategic initiatives under way to improve our financial performance. Please be aware that some of our remarks may include statements which are not historical in nature and may concern expectations, plans and objectives of Oxford regarding its future operation.

These remarks are forward-looking statements and are subject to the caution regarding forward-looking statements contained in our press release. We’ll also be discussing certain non-GAAP financial measures. Definitions and reconciliations of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures are included at the end of our press release. Our press release has been posted on our website at oxfordresources.com and furnished to the SEC in our Form 8-K filing.

With that I would like to turn the call over to Chuck for some opening remarks. Chuck?

Chuck Ungurean

Thanks Karen. When we last spoke we outlined the actions we were taking to restructure our Illinois Basin operations and to further strengthen our core Northern App position. As you can see, we are beginning to realize some positive results. Our Northern App operations grew their improvements and our profits and cash flows that were reviewed in our earnings release. In the Illinois Basin, we have optimized our mine plan to allow us to reliably serve our Illinois Basin customers who are producing coal at reduced cost levels. Greg will provide more detail on this in his remarks.

Improving Oxfords profitability is our main focus with our real opportunity for growth coming from higher sales volumes. On that account we have some good news. We have just reached in principle with one of our key customers that calls for the delivery of approximately 330,000 additional tons of coal in the second half of ‘12. As a result we expect to generate about $15 million in incremental revenue with a positive contribution to EBITDA and distributable cash flow.

Warmer summer weather has helped reduce the coal stock piles of utility customers. We’ve been encouraged by the improved demand we are seeing and our market area. The fact remains that coal is the primary fuel in our market. We sell our coal to scrubbed base-load power plants and we do this with a distinct transportation advantage over most of our competitors.

We continue to believe that our coal remains the most reliable and economical fuel for our long standing utility customers. Based upon the actions we have taken at our Illinois Basin operations coupled with increasing demand in Northern App, we expect to have a stronger second half of ‘12 in terms of sales, profitability and distributable cash flow. Looking ahead over 90% of our 2013 is committed and priced with the remaining production expected to be priced before the end of the third quarter.

Now I’ll turn this over to Greg to provide an update on our restructuring initiatives and mining operations. Greg?

Greg Honish

Okay I’m going to report on our progress in three key areas. First the status of our Illinois Basin restructuring plan. Second, improved performance at our Northern App operations and third our second quarter safety performance.

In regard to our Illinois Basin restructuring plan, we’ve nearly completed the relocation of excess equipment to our Northern App mines in Ohio. These equipment moves have contributed to improvements in our Northern App operations which I’ll discuss in a minute. We are continuing the right-sizing of our Illinois Basin operations to optimize performance under our current customer contracts. This includes deploying equipment and personnel in a manner that allows us to meet customer requirements from the lowest strip ratio mines with the resulting lower production costs. This will require the idling from time to time of various mines at our Illinois Basin complex.

For optimal flexibility in our operations, we will not be closing any of the idle mines. This will put us in the position of having an additional capacity to access as market and operational conditions dictate. In total we expect a reduction in our Illinois Basin production of approximately 1 million tons of 2012 compared to 2011.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

PayPal Wants to Consolidate the World of Rewards Points

PayPal Wants to Consolidate the World of Rewards Points

Dow Tumbles as Trump Calls Off North Korea Summit

Dow Tumbles as Trump Calls Off North Korea Summit

Facebook Is Now Labeling, Archiving Political Ads

Facebook Is Now Labeling, Archiving Political Ads

Canopy Growth: First Cannabis Firm on the NYSE Fails to Generate Buzz

Canopy Growth: First Cannabis Firm on the NYSE Fails to Generate Buzz

Complying With Europe's New Data Rules Could Be Costly for Facebook, Google

Complying With Europe's New Data Rules Could Be Costly for Facebook, Google