Alpha Natural Resources, Inc.'s (ANR) CEO Kevin S. Crutchfield on Q1 2014 Earnings - Call Transcript

Alpha Natural Resources, Inc. (ANR) Q1 2014 Earnings Call Corrected Transcript: 01-May-2014


Corporate Participants

Alex Rotonen - Vice President-Investor Relations, Alpha Natural Resources, Inc.

Kevin S. Crutchfield - Chairman & Chief Executive Officer, Alpha Natural Resources, Inc.

Frank J. Wood - Chief Financial Officer & Executive Vice President, Alpha Natural Resources, Inc.

Paul H. Vining - President, Alpha Natural Resources, Inc.

Brian D. Sullivan - Chief Commercial Officer & Executive VP, Alpha Natural Resources, Inc.

Other Participants

Caleb M. J. Dorfman - Analyst, Simmons & Co. International

Michael S. Dudas - Analyst, Sterne, Agee & Leach, Inc.

Curt Woodworth - Analyst, Nomura Securities International, Inc.

Brandon Blossman - Analyst, Tudor Pickering Holt & Co. Securities, Inc.

Kuni M. Chen - Analyst, UBS Securities LLC

Evan L. Kurtz - Analyst, Morgan Stanley & Co. LLC

Jeremy R. Sussman - Analyst, Clarkson Capital Markets LLC

Brett M. Levy - Analyst, Jefferies LLC

Mitesh B. Thakkar - Analyst, FBR Capital Markets & Co.

David Gagliano - Analyst, Barclays Capital, Inc.

Lance Ettus - Analyst, Tuohy Brothers Investment Research, Inc.


Operator: Greetings and welcome to the Alpha Natural Resources First Quarter 2014 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Alex Rotonen, Vice President of Investor Relations. Thank you, sir. You may begin.

Alex Rotonen, Vice President-Investor Relations

Thanks, Christine. Thank you for participating in today's Alpha Natural Resources First Quarter 2014 Earnings Call. Joining me today are Kevin Crutchfield, Alpha Natural Resources' Chairman and CEO, who will provide a brief market outlook and summarize our first quarter results; Frank Wood, our CFO, who will comment on Alpha's financial results and updated guidance and Paul Vining, Alpha's President and Brian Sullivan, Alpha's Chief Commercial Officer, who will be available to address operational and marketing questions following our prepared remarks.

Note that various remarks we make on this call concerning future expectations for the company constitute forward-looking statements. These statements are made on the basis of management views and assumptions regarding future events and business performance as of the time the statements are made. Various factors, including those identified in this morning's press release and in our filings with the SEC, may cause actual results to differ materially from those expressed or implied. Also, see our press release for reconciliation of certain non-GAAP measures to GAAP measures.

This call is being recorded and will be available for replay for a period of two weeks, and a replay of the event will be archived on our website at for a period of three months.

With that, I'll turn it over to Kevin.

Kevin S. Crutchfield, Chairman & Chief Executive Officer

Thanks, Alex, and good morning, everyone. The first quarter remained challenging for the coal industry, particularly in the metallurgical market. We continued to stay true to our core philosophy that we've mentioned on several occasions to control the things that we can control.

We think this quarter demonstrates that the actions we've taken to rationalize our cost base, manage production volumes, and maintain the quality of our balance sheet are having a positive impact on the aspects of our business that we can control. And more importantly, we're beginning to see small but important developments that give us some optimism regarding overall market conditions, both in the met and thermal markets. I'll address those more in a moment, but first, a headline summary of the quarter.

In terms of the top-line numbers, we generated total revenue of $1.1 billion and adjusted EBITDA of $289 million, including a $250 million gain from the Alpha Shale transaction during the first quarter, compared with revenue of $1.3 billion and adjusted EBITDA of $117 million in the first quarter of 2013.

Coal revenues in the quarter are $1 billion, down from $1.1 billion in the year-ago period. As we noted in our press release, decreases in total revenues and coal revenues in the quarter were primarily attributable to lower average realizations and lower shipments of metallurgical and steam coal.

Clearly, one of the things that we can attack and control, to a large degree, is our cost structure and our team did a very good job of that this quarter. Adjusted cost of coal sales per ton in the East continues to decrease, averaging $65.73 for the quarter. We're pleased to see tangible results from the measures we've taken. We expect to continue to perform in this area and consequently, we're reducing our Eastern cost of coal sales guidance to a midpoint of $66.50.

Importantly, we're very pleased also that we've been able to take the substantial costs out of our system while maintaining our unwavering commitment to Running Right. Our Mine Safety and Health Administration violations per inspected day remained unchanged from the first quarter of 2013, and our S&S citations were down 10%.

Beyond safety, we remain on the forefront of reclamation innovation at our mine sites. Recently, our Whitman Surface Mine won an Excellence in Reforestation award, and White Flame Surface Mine Number 9 won the West Virginia Coal Associations Surface Reclamation Award.

Our decreased costs, excellent safety track record, and our commitment to reclamation are a testament to the hard work of our team and their continued focus on running efficient but also Running Right.

I'd like to thank everyone for their tireless efforts on these fronts during the quarter.

On the financial side, I, and the rest of the management team, remain keenly focused on prudent balance sheet management during this down cycle. As a result of our cost management initiatives and proceeds from the exchange of our joint venture interest in Alpha Shale, and cash and common shares in Rice Energy, we increased Alpha's total liquidity to more than $2.1 billion, with cash, cash equivalents and marketable securities of nearly $1.2 billion.

We also reduced our outstanding 2015 convertible debt to $159 million, down from $194 million as we continue to manage our maturities effectively. We believe the strength of our balance sheet allows us to maintain our financial flexibility and continue our cyclical resilience while positioning the company to take advantage of improvements in the marketplace when they do occur.

In the broader coal markets, as you're well aware, oversupply remains the most significant challenge, particularly in the seaborne segment. In terms of met, the global seaborne market remains challenged, with pricing softening further in early 2014 due to the seasonal slowdown in Chinese iron production, relatively weak foreign currencies of major producing countries, and increased production of coking coal primarily out of Australia.

With the market significantly oversupplied, in our view, a large portion of the seaborne market is generating negative free cash flow, selling into the second quarter coking coal benchmark which declined $23 per metric tons to $120. We believe the pricing implied by the benchmark is unsustainable, and importantly, represents the bottom.

In our view, the global metallurgical coal supply is approximately 15 million to 20 million tons above the supply demand equilibrium. The encouraging part of the story is that we believe that the met market may be in the early phase of a necessary rationalization. We're starting to see supply cuts take place in Australia, Canada, and the U.S., with large producers idling mines or lowering production. So far, there have been announcements of more than 10 million tons on an annualized basis coming off-line in the next couple of quarters, and we would expect further cuts to be we announced in the coming months.

We're also encouraged that European economies continue to show modest to steady signs of improvement and fundamentals for integrated European steel mills seem to be improving, which should support increased opportunity in the Atlantic export market over time. These are good initial steps, but it will certainly take time for the market to firm materially.

As we've stated, we expect the oversupply in met to continue for most of 2014, but we do see the potential for a better supply/demand balance and improved met pricing taking hold in 2015. However, the reality is today, this is clearly a tough, tough market. Given market conditions, we're lowering our met coal shipment guidance for the year to 15 million to 18 million tons, down from 16 million to 20 million tons, as previously disclosed.

We believe we're well-positioned in met over the long term, and we'll be able to take advantage of improving supply and demand characteristics as they begin to take hold in the market.

Domestically, thermal coal is a more constructive market right now and is returning to a normalized level at a faster rate than met. With international thermal coal encountering a weak pricing environment, we believe domestic thermal markets present the greatest opportunity. And we're beginning to see positive developments that could be a precursor to an increasingly favorable pricing environment in the coming months.

As prices begin to firm, we're seeing the continuation of a trend that began in early 2014 with RFP activities strengthening and contract terms extending beyond the one 2014 and, in some cases, two-year mark. Moreover, we think this market could have been stronger if not for the met coal back loss into the thermal segment and encroachment of Colombian coals into traditional U.S. coastal markets.

With the return of more normal winter conditions from the warmer winters we've been experiencing, utilities across most of the U.S. grappled with extensive rail and barge disruptions. At the same time, their burns returned to more normal winter levels. As a result, all stockpiles dropped to an estimated 118 million tons by the end of March with many regions touching 10-plus-year lows. Natural gas inventories are also at multi-year lows, down nearly 50% from the year-ago period to just under 900 Bcf, which should support natural gas prices and strengthen coal's competitiveness in the domestic market.

The Powder River Basin is currently showing strength in light of very tight utility inventories and strong burn over the last three months, and we believe there is strong potential for this to continue. Days of coal burn in the PRB is at approximately 45 days, compared to the 5-year average of approximately 69 days and approximately 57 days at the end of December. Utility inventories in Northern Appalachia are also at multi-year lows, with approximately 46 days of burn at the end of March, down roughly 15 days from December and 24 days from March 2013.

Contracting in Central Appalachia is beginning to look more promising, too, with a meaningful increase in RFPs, including term business into 2015. Utility stockpiles in Central App are below the normal 5-year average days of burn at approximately 68 days, down from approximately 118 days in December and 124 days a year ago.

Lastly, on the domestic front, a significant concern is the burden that last winter's weather put on our country's power supply. Many plants that are scheduled for closure because of the new EPA mercury regulations, known as MACT, were critical for maintaining adequate electricity supplies during the coldest periods. These developments highlight the importance of the grid's reliability and appear to have prompted increased conversation among FERC commissioners, regional transmission organizations, and utility executives. While the outcome of these discussions is uncertain, it is welcome news for the coal industry, utilities, and most importantly, consumers.

In the seaborne market, API2 spot pricing remains weak in the upper $70s. We believe most U.S. thermal coal production and essentially all Central App thermal coal production is uneconomic at this level. European demand has been muted as a result of a mild winter and the opening of the Drummond Port has constrained API2 pricing.

While pricing for calendar year 2015 has improved over the past month to approximately $83, we think that this is still somewhat below a breakeven point for a majority of producers. Interestingly, major European economies, specifically Germany and the UK, increased their thermal coal imports by a robust 13% for the first two months of 2014 over the same period last year.

We believe that the long-term fundamentals of the seaborne thermal market are favorable. We expect thermal demand in Europe to increase due to an increased number of proposed coal-fired power plants, especially in Germany and an increasing desire to lessen reliance on Russian coal and natural gas. The increasing shift in Europe back to coal as a fuel-of-choice is a clear acknowledgement that an energy policy rooted in renewable subsidization translates to a less reliable energy portfolio and places a costly burden on job creators and consumers alike.

In summary, we believe Alpha had a solid quarter in terms of executing on the key things that we can control. We're well-positioned to continue managing our costs and our balance sheet. And we remain cautiously optimistic on the outlook for the coal markets in the back half of 2014 and moving into 2015.

With that, I'll now turn it over to Frank for a more detailed discussion of our financial results and 2014 guidance, and then we look forward to your questions. Frank?

Frank J. Wood, Chief Financial Officer & Executive Vice President

Thank you, Kevin, and good morning, everyone. I'm going to cover three main areas. First, I'll go over the first quarter highlights and key drivers. Second, I'll discuss our liquidity and key cash flow related items. And finally, I'll give some details on our updated guidance.

Coal revenues were $953 million in the first quarter, roughly in line with our fourth quarter coal revenues of $966 million and down from $1.1 billion in the year-ago period. Compared to the year-ago period, met coal revenues declined $126 million due to 13% declines in both shipments and average sales realizations per ton. Steam coal revenues declined $61 million due to lower shipments and lower per ton realizations in both the Powder River Basin and the East.

Compared to the fourth quarter of 2013, first quarter met revenues were down $32 million, primarily due to lower realizations, partly offset by a $20 million increase in Eastern Steam revenue which was driven by higher shipments. PRB revenue was essentially flat compared with the prior quarter.

Adjusted EBITDA for the first quarter was $289 million including an approximately $250 million gain in the exchange of our Alpha Shale joint venture interest with Rice Energy. Excluding the gain, our adjusted EBITDA would have been approximately $39 million compared to $71 million in the fourth quarter of 2013 and $117 million in the year-ago period. The primary drivers of lower EBITDA versus the prior quarter were declines in met and Eastern thermal sales realizations, which declined by $6.54 and $3.41 per ton respectively, as well as an absence of gain from asset disposals in the current quarter.

On the cost side, we are pleased with the progress of our cost reduction initiatives which have resulted in solid overall cost performance for the first quarter. Adjusted cost of coal sales in the East declined $1.24 per ton, to $65.73 from the fourth quarter of 2013 and $3.60 per ton from the year-ago period. It's worth noting that the first quarter of 2014 includes a $0.90 negative impact from a lower cost of market inventory adjustment. The Powder River Basin cost per ton was $10.23, down $0.06 from the prior quarter.

I want to caution that the second quarter Eastern adjusted cost of coal sales per ton will likely be impacted by a scheduled longwall move at Cumberland, the start up in the new longwall mining district at Emerald. These longwall changeovers are expected to have an approximately $1 to $2 per ton unfavorable impact on second quarter Eastern adjusted cost of coal sales per ton.

Selling, general and administrative expense was elevated at $41 million in the first quarter, due to merger-related expenses of approximately $6.2 million, consisting largely of defense costs for a legacy Massey litigation matter that recently went to trial and higher employee compensation charges.

Excluding the merger-related expense, first quarter SG&A would have been slightly under $35 million. We are still comfortable with our guidance range for 2014, as we still have incremental SG&A savings to realize, and employee compensation charges in future quarters are expected to be reduced.

Let's turn to Alpha's liquidity and cash flow related items. During the first quarter, cash flows provided by operating activities was a use of cash of $54 million, compared with a source of cash of approximately $65 million in the year-ago period.

Please note that first quarter cash flow used in operating activities included a cash outflow of approximately $30 million for Alpha's escrow payment for the shareholder class action litigation settlement, $9 million for repurchase of convertible notes in the fourth quarter that we didn't cash settle until this quarter, and $7.5 million of cash interest. We also repurchased approximately $25 million of the 2015 convertible notes, which are shown as a cash outflow in financing activities.

During the first quarter, Alpha's total liquidity increased by more than $220 million to approximately $2.1 billion, consisting of cash, cash equivalents and marketable securities of nearly $1.2 billion which includes $100 million in cash and approximately 9.5 million shares of Rice Energy valued at approximately $251 million plus more than $900 million available under the company's secured credit facility.

As Kevin referenced, we are adjusting our 2014 guidance to better match our production with current market conditions. Alpha now expects to ship between 78 million and 88 million tons of coal, including between 15 million and 18 million tons of metallurgical coal and between 26 million and 30 million tons of Eastern steam coal.

Powder River Basin shipment guidance remains at 37 million to 40 million tons. As of April 16, based on the midpoint of these expected shipment ranges, Alpha has 86% of its met coal committed and priced at expected average-per-ton realizations of $88.90 and another 9% committed and unpriced.

We have 86% of our Eastern steam coal committed and priced at expected average-per-ton realizations of $59.06 and 13% committed and unpriced. And in the West, we have 100% of our Powder River Basin coal committed and priced at expected average realizations of $12.04 per ton.

Alpha's guidance for Eastern cost of coal sales is now $64 to $69 per ton, reflecting a $1 reduction of the high end from $70.

Western adjusted cost of coal sales remain in the range of $9.50 to $10.50 per ton. Our selling, general, and administrative expenses, excluding merger-related expenses, are expected to remain in the range of $110 million to $140 million. We now expect depreciation, depletion and amortization to be between $700 million and $800 million, while interest expense is projected to remain between $240 million and $255 million, of which approximately $200 million to $210 million is cash interest.

Capital expenditures, we are lowering our guidance to a range of $225 million to $275 million, representing a $25 million reduction from the previous range of $250 million to $300 million. This compares to CapEx of $258 million in 2013, $498 million in 2012. The capital expenditure guidance includes a $42 million LBA installment payment in 2014. Our final LBA installment payment of $42 million is due in the fourth quarter of 2015.

For modeling purposes, I want to clarify some key cash flow items that we have either realized or expect in 2014. Alpha received $100 million in cash from Rice for our Alpha Shale joint venture, as well as 9.5 million shares which are subject to the customary 180-day lockup period ending in late July. The value of the Rice shares at March 31 of approximately $251 million is shown as a long-term marketable security and is included in our total cash, cash equivalents, and marketable securities.

The value of these shares is mark-to-market with the change being reflected in other comprehensive income. As I mentioned earlier, during the first quarter, we paid $30 million into escrow for the shareholder class action lawsuit, and we expect to pay the remaining $165 million of the settlement during the second quarter. Per the EPA Consent Decree, which we announced earlier this year, we expect to pay the civil penalty of $27.5 million in the third quarter. The related CapEx which is expected to be approximately $160 million is expected to be invested over the next three years with the current year portion of approximately $50 million included in our CapEx guidance for 2014.

And, operator, we will now open the call for questions.


Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Caleb Dorfman with Simmons & Co. Please proceed with your questions.

<Q - Caleb Dorfman - Simmons & Co. International>: Good morning, gentlemen. Thank you for taking the questions.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Good morning.

<Q - Caleb Dorfman - Simmons & Co. International>: I guess, first off, on your Eastern cost guidance, you're cutting a bit of met which I assume is at the higher end of the cost structure, and you're only lowering the top end of your guidance. Frank, can you sort of walk us through what would drive you more towards that $69 a ton cost structure? Because it seems based on that LTM charge and based on even a worst case longwall impact, it seems like you'd be more at the midpoint or even below.

<A - Frank Wood - Alpha Natural Resources, Inc.>: Yeah. I mean, Caleb, we continue to forecast or to guide to a range in Eastern costs that we traditionally have. I mean, the things that is most sensitive and causing it to jump around quarter-to-quarter and then we'll obviously determine where the year comes out are the performance of the longwalls which was strong in the first quarter. That was a strong first quarter. We do think, over the course of the year, we'll have strong performance but it will vary with the longwall moves and maybe some other condition-related things.

We continue to experience some fairly significant idle mine costs that we continue to work to reduce. That's one of our key cost reduction initiatives. But there is some uncertainly over exactly where we'll get on that over the course of the year, particularly as we look at, perhaps, adding more to the idled mine category. And those are probably the two major things. Again, just also the pace of our other cost reduction initiatives on both the productivity and maintenance sides. While they've been realizing very good results, again, we maintain a range of expectations for those.

<Q - Caleb Dorfman - Simmons & Co. International>: That's helpful. And then, I guess, Kevin, you did cut your met guidance, can you talk to us about is this all that you possibly think that you could cut even if we see $120 or sub-$130 or a depressed met pricing environment for an extended period? What would get you to the high or low end of that guidance?

<A - Paul Vining - Alpha Natural Resources, Inc.>: Yeah. This is Paul Vining. Most of the met mines are - basically, it's typically CM mines, as well as some surface mines. And we've got the ability to dial up and dial down primarily through the cutting back of shifts or going to four-day weeks. And that's going to be highly sensitive to the met pricing environment as we go forward. I mean, it's a natural question I'm sure on somebody's mind in the queue here. Your cost is x and prices are y, are you running mines and losing money, and we've got some that are marginal that we continue to drive down cost on. And we're going to have some [ph] audibles (25:28) as we go forward on some of our mining complexes and some of the operating level. So it certainly is sensitive to two things, the pricing environment in the back half of the year, as well as the success of some of our cost reduction initiatives.

<Q - Caleb Dorfman - Simmons & Co. International>: So feasibly if the pricing environment stays tough, you could be approximately 15 million tons or below?

<A - Paul Vining - Alpha Natural Resources, Inc.>: No, I didn't say that. No. I said it's in the range - we're talking about within the range, the low end versus the high end. We've got plenty of flexibility within the operations to dial up and dial down.

<Q - Caleb Dorfman - Simmons & Co. International>: The 15 million tons takes into account a very depressed pricing situation.

<A - Paul Vining - Alpha Natural Resources, Inc.>: Yeah. I mean, you could take the midpoint and do the math and take a look at the theoretically uncommitted and assume that, if it's a horrible environment, the uncommitted drops and we'll be at the low end of the range and it's not something we can predict with any confidence at this point. Like anybody in the world we're waiting and watching to see how the price develops.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: So, the other thing we're [indiscernible] (26:37) waiting on too, Caleb, is to watch what the supply side response is going to be. I mean the curtailments are starting to stack up pretty quickly. And in fact, I think somebody was out predicting this morning that maybe they were happening too quickly which would hasten a much faster supply response than anybody had anticipated.

But I think the goal here is to be nimble and flexible as we work through this cycle. And to remind everybody, there was a period in 2011 on a pro forma basis where we produced - I think it was close to 24 million tons of met. So, we can move this thing up and back based on what's happening in the marketplace and we don't want to drive long-term decisions based on what one three-month-period of pricing is going to do.

<Q - Caleb Dorfman - Simmons & Co. International>: That's all very helpful.

Operator: Our next question comes from the line of Michael Dudas with Sterne, Agee. Please proceed with your question.

<Q - Mike Dudas - Sterne, Agee & Leach, Inc.>: Good morning, gentlemen. I hope Kevin - I hope the market does think they're taking tons off too quickly. So my first question is Southern Company in its recent Q1 indicated a pretty nice uptick in coal utilization for PRB and non-PRB coals. I wanted to see if you're seeing that from other customers that would typically historically use some Central App coal. And is there a scenario where we can actually see a continued rapid decline in inventory levels in Central App and see some better pricing and some term business that could actually surprise people for the upside, assuming gas is where it needs to be and coal inventories continue to be pressured by the utilities?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Mike, let me try and provide a little bit of context here and then Paul and Brian can weigh in a minute. First thing I'd say is, number one, we are seeing a significant uptick in RFP activities, specifically around Central App. And I think it's attributable to several things and one is the polar vortex or winter that we had that really highlighted some risks that we have in the grid, and it's causing maybe people to step back and say are we moving this thing too fast.

And then the whole natural gas phenomena is going to get pretty interesting with storage levels where they are and whether gas will continue to dispatch or they'll try to build inventories back up or some combination of the two, either one of which we believe is going to keep upward pressure on natural gas prices and benefit coal in some way.

And then we've got the nuclear fleet that is a fair amount of it undergoing refueling over the next few quarters. So we think there's the potential here for a pretty interesting environment for the balance of the year. And we can see it just by virtue of the number of RFPs that are out, the phone calls that we're getting, prices beginning to move, that sort of things, but I looked to Paul and Brian as to whether they want to add anymore context or color around that.

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: Yeah, Mike, we're, to echo what Kevin said, we're seeing big Southeast and Mid-Atlantic utilities that have been talking about vastly reducing to eliminating CAPP coal burn coming back into the market pretty strongly in the back half for this year and into 2015. So we had a significant uptick this year in the CAPP thermal that we've sold for 2014. And if the natural gas trend continues on, it's kind of 4.80 for the average for the strip, 12 months going forward. That back half of the curve going up has influenced a lot of behavior. Obviously, the utilities are watching that very closely and I think the storage report just came out five minutes ago. And it is again below the average injection needed to get to the end of the refill season. I think it came out at 80-ish, 82.

So that's again, another below-trend number, so that looks like its continuing support of gas which will, in turn, support CAPP and PRB. You've had some - we've had low inventories and combined with transportation problems they're obviously supporting the prices out there, and we're seeing that, we've been able to move prices up and we expect that to continue.

<Q - Mike Dudas - Sterne, Agee & Leach, Inc.>: A quick follow-up to that. You mentioned I think, Kevin on the prepared remarks about crossover export coasting local, is this single-digit number maybe for Paul or Brian, or is it double-digit number that you see that's adding to the supply?

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: Are you talking about the volume of crossover coal?

<Q - Mike Dudas - Sterne, Agee & Leach, Inc.>: Yeah, and coals that would have been exported but API is not letting it.

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: In our portfolio or across, in general?

<Q - Mike Dudas - Sterne, Agee & Leach, Inc.>: Across generally, if you think it's like single digits in tons or is it more double digit in tons?

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: My guesstimate would be low-double digits. You've got a lot of coal that was going to China that may have been out of MACT and that may not be finding a home in Asia, and you've got the more traditional crossover coals in Central App that are coming back to thermal markets.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Yeah. I think it's kind of hard to say right now, Mike. I mean it's a new phenomena, obviously, and it's a little bit of work in progress and something that we'll obviously monitor very closely to see what the effect of that will be. I do believe though, like I said in the prepared remarks, had it not been for some of that, we would have seen this thing move a little more sharply than it has already.

<Q - Mike Dudas - Sterne, Agee & Leach, Inc.>: And just one final quick for my follow-up question. Kevin, any update on Alpha's thoughts about monetizing its other Marcellus opportunities?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: I've got a little incremental information for you. I don't really want to talk about monetization. But again, if I can draw the parallel between what we did with our first joint venture and how we're proceeding with our second one, number one, it takes some time to amass the land position that you need to unitize drilling units. So we're just in the infancy of this. But I'm happy to report that we have more than doubled our acreage position since we put the joint venture together.

So our plan is to continue down that path. We're beginning to think now when we might be able to start the actual drilling activities which could be as early as this fall if things go well, probably no worse than spring of next year. And so on that basis, it's really advancing a little faster really than the first joint venture. So, a little bit of incremental information there for you, not a lot, but it ought to be some nice color for you to consider as we continue to develop this joint venture out.

<Q - Mike Dudas - Sterne, Agee & Leach, Inc.>: Thank you, Kevin. I appreciate it.

Operator: Our next question comes from the line of Curt Woodworth with Nomura. Please proceed with your question.

<Q - Curt Woodworth - Nomura Securities International, Inc.>: Hey, good morning, everyone.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Hey, Curt.

<Q - Curt Woodworth - Nomura Securities International, Inc.>: I guess just a quick follow-up to that. I think your legacy acreage position is, I think, 15,000 acres. So, can you give us a sense for what the acreage would be right now for the total JV that you're developing?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Yeah. I think we talked - we specifically referenced on the last call that we contributed something on the order of about 10,000 acres into this latest JV, which again doesn't include all of our acreage, but it's in kind of a logical area. We've created a project area around that. And since that time, the joint team has more than doubled those holdings, which is allowing us now to begin to unitize a few areas for future drilling activities.

<Q - Curt Woodworth - Nomura Securities International, Inc.>: And have you stated who the joint venture partner is?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: We have not.

<Q - Curt Woodworth - Nomura Securities International, Inc.>: Okay. And then a follow-up on the PRB market, 45 days, it's a little bit below normal for this time of the year, but it seems like it is going to get much tighter this summer. So, I'm just wondering, how do you think the supply side can respond to that? You mentioned that you guys are basically sold out for this year. Do you think there will be a big response as the rail performance starts to improve, or do you think maybe the cycle will be different where you'll see a little bit more restraint from the basin?

<A - Paul Vining - Alpha Natural Resources, Inc.>: This is Paul Vining. I don't think we can comment on our competitors. But I think, generally speaking, it's going to take equipment and manpower to ramp up in any material fashion for any mine out in the basin.

And that doesn't happen in a period of two or three or four months with operations like that. So I suspect everybody'll be making their own prudent business decisions and investing capital and hiring people or not depending on their circumstance.

But I would echo your comments, I think there is going to be opportunity and there certainly is a - there's an uptick taking place and that will continue to take place particularly with gas storage being at 10-year lows and the injection levels needing to be at record levels basically between now and October to get back to some reasonable storage level for the winter heating season. So it's setting up to be an interesting dynamic.

<Q - Curt Woodworth - Nomura Securities International, Inc.>: Okay. Great. Thanks.

Operator: Our next question comes from the line of Brandon Blossman with Tudor Pickering Holt. Please proceed with your question.

<Q - Brandon Blossman - Tudor Pickering Holt & Co. Securities, Inc.>: Good morning, guys.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Hey, good morning.

<Q - Brandon Blossman - Tudor Pickering Holt & Co. Securities, Inc.>: Kevin, big-picture question, you guys have done a tremendous amount of work over the last 18 or so months on slimming down the portfolio, getting costs in line. What's on the top of your list, maybe top three items on your to-do list for the balance of 2014? Just where are you going to focus your efforts?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: That's a good question. I mean, number one, we're going to maintain a keen focus on continuing to deliver good safety results because we care deeply about our people and really believe in our efforts there.

We're going to maintain a very strong focus on our balance sheet to preserve and generate liquidity where we can to make sure that it carries us through this cycle and gives us the flexibility to continue executing on our business plan.

And then, we're going to continue to hammer away at where we can find costs to take out of the system. I think we've done a pretty good job of that so far, and there is incremental room for improvement there, but probably not to the same degree that we've experienced thus far.

And I think also, a very key element for us, too, is we play across really what I can think of as four channels, domestic and export thermal, and same for [ph] metallurgical (37:45) and maintaining a very close eye on those markets and what's happening in each and being able to flex our infrastructure to participate in the one that makes the most sense is really something that we've prided ourselves on and we very deliberately set up this export thermal model a couple of years ago.

And it's still in its infancy, but we're very pleased with the progress that we've made there and the relationships that we've developed. And continue to believe that there's a long term future there, the question is just how big is it and how competitive we can be against the South Africans and the Colombians and the Russians and what not. But we've got a proven workforce, we've got a great reserve, we've got a great infrastructure and we're open for business. And I think there is a benefit there long term, especially as you see the policy issues coming to bear in Europe that are kind of biasing back towards coal. I think it's going to take a while to play out, but we feel pretty good about the position.

<Q - Brandon Blossman - Tudor Pickering Holt & Co. Securities, Inc.>: Thanks, I appreciate that color. And then a detail question and you touched on this a little bit earlier. But Central App thermal, may be back in vogue a little bit, at least for the summer of 2014, is there reasonable flexibility in the mines to be able to meet any kind of incremental demand on a year-over-year basis on the thermal side in Central Appalachia?

<A - Paul Vining - Alpha Natural Resources, Inc.>: Yeah, this is Paul Vining. We've - I guess the best way to answer that is we try to structure all the mines to maintain a degree of flexibility, just flex up as well as flex down. And there's incremental opportunity for the balance of the year. And we're particularly excited, to be honest with you, about 2015 because there actually has been a fairly significant supply response in Central App on thermal coal over the last two or three years.

But it's taken a fair amount of capacity out. And we've maintained pretty highly efficient, our lower-cost thermal mines in CAPP with a lot of upside and opportunity next year, particularly given, again, the messages that natural gas storage is going to be a huge driver. And we see the utilities starting to reformulate how they look at Central App and the insurance policy they may or may not need if this gas thing runs to $6 or $7 or $8.

<Q - Brandon Blossman - Tudor Pickering Holt & Co. Securities, Inc.>: Very cool, something to watch for. Thanks, guys.

Operator: And our next question comes from the line of Kuni Chen with UBS. Please proceed with your question.

<Q - Kuni Chen - UBS Securities LLC>: Hi. Good morning, everybody.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Good morning, Kuni.

<Q - Kuni Chen - UBS Securities LLC>: Thanks for taking my question. I guess just a quick one. First off, on the $250 million gain, what's the after-tax impact of that?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Approximately $190 million.

<Q - Kuni Chen - UBS Securities LLC>: Okay. Great. Now, on the met coal side, it looks like you've committed in price about 4 million tons in the quarter in the $70 range. Can we dig into that a little bit more? Is that contractual that led to those prices, or is that just going out there in the market? Maybe you can also give us some color on the type of grades involved here.

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: Yeah. Kuni, I don't think the number was $70, certainly, for the back-end calculation that you're probably doing was significantly higher than that. But we did have a quarter in Q1 that had a higher percentage of what we'll call crossover coal that we've already referenced that is coal that can swing between the thermal and the met market. And in Q1 with declining realizations, that was probably the hardest hit segment in terms of pricing as the spot assessments went really down below $110 for the quarter.

So our priced tons in Q1 were reflective of more export business and this crossover coal, which is typically lower priced than our domestic premium qualities that we talked about in Q4 that we put to bed when prices were higher in Q4. And so that - we had a higher percentage of high quality coals put to bed in Q4. Q1 swung to a higher percentage of the lower ranking coals that were priced at more prompt prices that were reflective of the market, going below $110 on a spot basis.

<Q - Kuni Chen - UBS Securities LLC>: Okay. [indiscernible] (42:35)

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Kuni, to put a little finer point on that, Brian, correct me if I'm wrong, but something on the order of three quarters of that volume was in that lower quality spectrum.

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: Yeah. We had - probably that would be a good split of your high ranking coals versus lower ranking coals. It's probably about a 25-75 split, yeah.

<Q - Kuni Chen - UBS Securities LLC>: Okay. And then, just as a follow-up on the met coal side. When you guys look at your - the cost position of your mines and obviously taking into account the weakness that we're seeing in the market here, many of your peers have taken off a good amount of production so far. It looks like you're just nudging back on shifts and overtime and things like that. Is there something else holding you back from taking out more tons, perhaps, since you're basically 95% committed for the year and there's an unwillingness to walk away from contracts, or if you could just give us some color again on your willingness to, perhaps, take more tons out of the market?

<A - Paul Vining - Alpha Natural Resources, Inc.>: Yeah. This is Paul Vining. I think we've got to back up a little bit and kind of point out the fact that a couple of years ago on a pro forma basis, Massey and Alpha in 2011, I think were at 24 million tons. And we actually got out ahead of this in an optimization rationalization exercise where we've shut down mining complexes, preparation plants and mines and that sort of thing. So, we've - I won't say that we've already given our full allotment of blood, but we have made some pretty significant cutbacks and strides over the last couple of years.

So, the increment that we have to go to now, some of our competitors may be catching up. They don't have as big a portfolio. In our case, we don't have any major mining complexes at this point that we're focusing on shutting down. The market is such that this is a quarterly market on the export side. It's a long-term business where we see a resource and a cost structure that has long-term value. It's not something where you can just flip a switch on and off from quarter to quarter in terms of employees, in terms of care and maintenance costs, and certainly in terms of customers.

A good deal of this coal is under sort of Evergreen-type contracts where you have volumes and the quality is defined, but you have a quarterly negotiation that, to some degree, revolves around trends in the market such as the benchmark. But at this point, kind of to reiterate what I said earlier, the actual volumes that we have and where we head here over the next six months is going to be sensitive to that benchmark and ultimately the prices that we can realize are not.

The other part to add is the fact that the volumes that we classify as met are also going to be influenced by the opportunities that we see in the CAPP thermal market where we have sold some of our met coal into the thermal market in CAPP because it did have better realizations. And we'll continue to do that as opportunities present itself and that in its own way is a supply response in terms of taking met coal out of the met market and optimizing our book of getting the best revenue per ton that we can get and that will buoy, or at least help bring up the lower end of the met market, because the customers won't find some of those lower quality materials available for cheap prices.

<Q - Kuni Chen - UBS Securities LLC>: Okay, great.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: And the last piece that I would add to what Paul said is that if you take the midpoint of what the revised guidance this morning, that leaves us, I don't know 2.3 million, 2.4 million tons to either price or sell or both this year and that's biased - much more very biased towards the higher quality end of the spectrum, more like a two-thirds, one-third split. So, leaving that one-third kind of out there to Paul's point as to whether we decide to do something more with that or things move in the next quarter and we decide to leave it on the met side. But that decision has not been made yet.

<Q - Kuni Chen - UBS Securities LLC>: Thank you.

Operator: And our next question comes from the line of Evan Kurtz with Morgan Stanley. Please proceed with your questions.

<Q - Evan Kurtz - Morgan Stanley & Co. LLC>: Hi. Good morning, guys.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Good morning.

<Q - Evan Kurtz - Morgan Stanley & Co. LLC>: I just wanted to follow up on that last question actually. Of the kind of 3.5 million in production reduction you're looking for in the met coal from last year, just using the midpoint of your new range, how much of that is idling mines versus crossover tons versus reduced shifts at mines that will continue to operate? Can you just give us kind of a rough sense there?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: That's a good question. I'm not sure I could answer that with any degree of specificity that I might not regret later. So, let us do a little work on that, maybe we could circle back with you. I don't know the answer to that question honestly.

<Q - Evan Kurtz - Morgan Stanley & Co. LLC>: Okay. And maybe just like ballpark in just the overall market on the crossover met tons that can move out of the met market into the thermal market. How big of an opportunity could that be as far as - are we talking double-digit millions of tons or something smaller?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: For us or for...

<Q - Evan Kurtz - Morgan Stanley & Co. LLC>: Just for the industry in general in Central Appalachia.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: I think Brian touched on that earlier. I think maybe high-single digits, low-double digits, probably somewhere in that zip code.

<Q - Evan Kurtz - Morgan Stanley & Co. LLC>: Okay. And maybe just one last question on this. This 15 million tons to 18 million tons range, a lot of that is already contracted this year. If we were to - if the environment would persist sub-130 met coal into 2015, how much scope is there to lower those numbers going into next year? Are you being supported at all right now from the domestic settlements in the beginning of this year?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Well, I think the view would be that we're going to see a supply-side response, which has already begun in earnest which we think will at some point invoke a price-side response. So, rather than speculate, what I'd suggest to you is we've reacted when the situation was appropriate and we'll continue to do so. But needless to say in a sustained pricing environment like the one we're in now on the met side, you're going to see a supply-side response because there are jurisdictions in the world, in fact, most jurisdictions in the world it doesn't make sense with these kind of numbers. So it's going to hasten our supply-side response much like we said on the last call and continue to reiterate today.

<Q - Evan Kurtz - Morgan Stanley & Co. LLC>: Gotcha. Thanks, guys.

Operator: Our next question comes from the line of Jeremy Sussman with Clarkson Capital. Please proceed with your question.

<Q - Jeremy Sussman - Clarkson Capital Markets LLC>: Hi. Good morning, everyone.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Good morning.

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: Good morning, [ph] Jim (49:56).

<Q - Jeremy Sussman - Clarkson Capital Markets LLC>: Just to kind of follow up if the Emerald and Cumberland continue contributing like they did in Q1. Would costs likely come in at the low end of the range?

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: Yes.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Jeremy, that will certainly - yeah, that will certainly help us get probably either get there or very close to there.

<Q - Jeremy Sussman - Clarkson Capital Markets LLC>: Okay. Thank you. I'm just trying to get a sense on the range. And then Kevin, just to clarify, I think you said that you had originally contributed 10,000 acres to the new JV and then that doubled, so does that mean the entire JV has 20,000 gross acres and you have about net acres about half of that? And then either way, can you just give us a little bit more precise sense of where the acreage is?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: It's in Southwest Pennsylvania in Greene County. How is that for precision?

<Q - Jeremy Sussman - Clarkson Capital Markets LLC>: Good enough.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Yeah, [ph] Matt (50:57), how about right in the middle of the fairway of the Marcellus, that's probably a better description. Yeah, look we contributed - we created a project area because you can only do so much. So inside of this project area is where those original 10,000 acres that we contributed are oriented. And since then, we've doubled that plus a little bit more. So, it's safe to say that it's north of 20,000 acres and we continue to acquire. And we'd like to grow that and we have a view towards where we'd like to take that to, ultimately. But we're beginning now to think about how to unitize and where the first few holes ought to be spotted.

<Q - Jeremy Sussman - Clarkson Capital Markets LLC>: Okay. Thank you very much.

Operator: Our next question comes from the line of Brett Levy with Jefferies. Please proceed with your question.

<Q - Brett Levy - Jefferies LLC>: Hey, guys. Maybe more of a macro question around the whole - there's kind of a group think - that says that met coal is going to be lousy for the balance of this year. And then sort of suddenly in 2015, everything comes around. We've talked about the supply-side response, some of the growth in China and Korea and out of Europe in terms of steel consumption. Have you guys have done a bit of math and said, how much of the, call it, 30 million tons of overage is now 20 million tons because some of the closures? And how many more closures and how much growth gets you back to equilibrium? I guess I want to get a sense from you guys as to sort of how strongly you believe that 2015 will be very different and kind of what are the key supply and demand components are you thinking just to get there?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Wow, [indiscernible] (52:40).

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: Thanks, Brett. That's a question we spend a lot of the entire building spends every day, wondering about, so I appreciate it. Yeah. We do believe that the 20 million to 30 million tons number is kind of a begin entry overage going into the year. And just in this season, over the last two weeks, we probably have had 13 million tons announced on an annualized basis. So, there's still a bit of work to do, if you're assuming that there aren't any exogenous or outside supply interruptions, which do happen as you know. So I think those aren't all going to come from the United States. I think you've heard a position outlined that that would be the case. We feel very strongly that that won't be and we think that it's going to come, kind of ratably, the U.S. has led the charge thus far. Most of that 13 million tons that have been announced are, I think 10 million tons or more of it is from the U.S.

So I think as, if this pricing environment marches forward, you're starting to see a more steady drip of news out of Australia about their production and what happens to those, other than the likes of BHP that have built new capacity. The cost curve down there is 110, is the median, roughly and that means half of the Australians are producing higher than 110. That can't go on forever in this pricing environment. So I think you're going to start to see a steadier march of production coming off in other parts of the world if this pricing environment goes forward.

<Q - Brett Levy - Jefferies LLC>: And sort of with that in mind and obviously a very busy cyclone season, it isn't something you would wish on the people of Australia, but the met coal market would be very happy with it. Is there any sort of customer activity right now that suggests that some of the volumes you booked for 2015 might be at better prices, just in anticipation of that tighter market?

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: Yeah, it's too early. We don't traditionally engage in that far out in the future of pricing, annual pricing gets done typically in the fourth quarter for the prompt year. And the international business is much more, as Paul alluded to, [ph] short-tenure (55:08) quarterly-type business. So, we're not seeing - the very prompt business we're seeing reflects the fact that there is a tighter coal supply in the U.S. and we're already seeing on a vessel-by-vessel basis, we've been able to push pricing over the most recent benchmark for a couple of cargos. So, we view that as positive that we've already broken over 120 for a couple of our higher qualities that we've contracted for kind of May, June shipments.

<Q - Brett Levy - Jefferies LLC>: That's very good color. Thanks, guys.

Operator: Our next question comes from the line of Mitesh Thakkar with FBR Capital Markets. Please proceed with your questions.

<Q - Mitesh Thakkar - FBR Capital Markets & Co.>: Good morning, everybody.

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: Good morning.

<Q - Mitesh Thakkar - FBR Capital Markets & Co.>: My first question is just on the met coal, steam coal and volume. You might be able to help here a little bit. It looks like from the recent production cut, some of the met volume has shifted into the steam coal market. Do you think there is a price improvement in the steam coal market from the met coal market? Because when I look at your realizations for the incremental tons you placed, it's like you're replacing $75 a ton for the met side but steam was like $60. So, is that a price improvement which I'm missing here, or is that something else going on which probably I'm not getting my arms around?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Yeah. I think it's kind of hard. The granularity in the numbers is hard to see behind it because the met is met but the Eastern steam includes Northern App coals, as well as raw coals that are unwashed and go into the export market. So, it's several different types and qualities of coal. But to answer your question about is, is this going to impact or dry up the supply of met coal and the answer is yes, and that was kind of the point I made a couple of questions ago.

As we and others move some of our lower quality met coal into the thermal markets, be it [ph] a 12-2 coal (57:24) or 13,000 coal, PCI coals and high vol Cs, and some of lower quality materials that the bottom feeders in the market typically buy from a met coal standpoint. They're finding that those coals are not available and we consciously sold domestic thermal coal into the Southeast where there's demand and customers rather than sell that same coal to some of our traditional customers through PCI or high vol C and some of the lower quality mets and realized better prices and better overall economic conditions, which could include more raw coal and less washed coal and things of that nature in terms of lowering your overall costs.

So, I'm sure others are doing the same thing and what it means is, customers who see - there's a big ocean of met coal that's going to get a little bit smaller, not just because of cutbacks, but also because of the shifting of some of that lower end product into the thermal markets.

<Q - Mitesh Thakkar - FBR Capital Markets & Co.>: Great. And just my follow-up on the PRB side, it looks like we are seeing a little bit of spread between 8,800 and 8,400. For most of the last couple years we spent at around $1.50 kind of a level, now we are at almost $2.50. A, do you think that lasts, and B, what is driving that? Because we are expecting some 8,400 mine rationalizations next year, are utilities concerned about it at all?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Yeah. I think if you look back historically and I don't have this documented, but my experience has been that the spreads blow out as the market improves and it's actually a good leading indicator.

Customers, particularly those that are long distances away, prefer higher-quality coals because of the significant amount of freight involved in the transaction. So there typically is a stronger demand at the beginning for the higher-quality materials. It blows the spreads out and hits sort of an asymptote, and the lower quality materials fall alone. So, none of that's surprising based on history. It doesn't mean they don't want the lower quality coals, it's the - really if you think about it, they're buying BTUs rather than just a kind of coal. So, it's the delivered cents per million and the overall operation of their boilers.

<Q - Mitesh Thakkar - FBR Capital Markets & Co.>: So, do we expect a catch-up there?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: No. I think it's not unusual. As long as demand is increasing, the market is tight, and there's a bullish environment, I think you're going to see a spread there between 8,800 and 8, 400 that goes back to some traditional levels that we've seen in the past. And I guess, the other way to explain it, when the market collapses in the PRB, demand falls off and there's more supply than there is demand. Typically, the lower quality guys get down to a - I won't call it a marginal cost but a cost plus a small margin, and the higher quality guys, basically, have to collapse that spread to keep their volumes moving. They give up some of their value opportunity for those extra BTUs in terms of capturing the volumes necessary to run the mines. And when things turn around as they are now, those spreads increase just naturally.

<Q - Mitesh Thakkar - FBR Capital Markets & Co.>: Great. Excellent color. Thank you very much. I appreciate it.

Operator: Our next question comes from the line of David Gagliano with Barclays. Please proceed with your question.


<Q - Dave Gagliano - Barclays Capital, Inc.>: Great. Thanks for taking my questions. A lot of them have been already answered. I just wanted to follow up on a couple of them. Following up on the comments earlier on the supply side on met, I'm looking beyond what obviously seems to be the inevitable rebalancing here. What does your analysis show in terms of what benchmark price would bring that idled capacity back on line? And how much idle capacity do you think would come back?

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: Dave, it's Brian. I'll take a shot at that. I think you can't really predict about idled capacity generally because each jurisdiction is different. When you get capacity in the U.S. that's going down, that's truly shut down as opposed to just care and maintenance, I think you have to distinguish between those. So I don't think that we have the time to get into the granularity of which capacity is truly shut down versus idled.

The inducement price, we spent a lot of time thinking recently about what price brings back on new tons at a adequate rate of return, and that price is at least $50 higher than it is right now on a benchmark basis. So that's a pretty long grind from here to have any truly new capacity come on or capacity that was shut down that would require capital to be back into.

So obviously there's been a lot of downward movement in the last year. And before anybody gets wild ideas about bringing anything back on, you got to examine on a mine-by-mine basis what capital is required to bring it back in, because this past 1 year or 18-month period is still going to be pretty fresh in everybody's mind.

<Q - Dave Gagliano - Barclays Capital, Inc.>: Okay. All right, that's helpful. And then in terms of your operations, I'm wondering if you could give us a little bit - just maybe some kind of an average or some kind of framework around the cash cost of production for the 15 million to 18 million tons of met that you are producing for 2014?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: It spans a pretty wide latitude, Dave, depending on the quality. I mean, obviously, the higher the quality, typically the higher the cost, because there's interseams, it's harder to get to, et cetera. But it's a pretty big range. And I think getting into averages in the context of our portfolio and how we dispatch it is a pretty dangerous, slippery slope.

So you ask us this all the time and I continue to give you the same answer. So, apologies, but the answer is still the same.

<Q - Dave Gagliano - Barclays Capital, Inc.>: So what about - I mean, a range like how wide is that range?

<A - Paul Vining - Alpha Natural Resources, Inc.>: This is Paul. I'd say that it goes anywhere from the mid to upper $50s to, bulk of it, to the high $90s. There's very few tons that are triple-digit. And we continue whittle away at those compared to what it was a couple of years ago. But the bulk of it is in that range from the mid to high $50s to the mid to high $90s.

<Q - Paul Vining - Alpha Natural Resources, Inc.>: Perfect. Thank you very much. Then just one last question, on the - just on the U.S. thermal market. What do you think the change will be in 2015 versus 2014 in terms of the export volumes out of the U.S. given the positive view in the U.S. relative to what looks likes will be a bit of a longer period of weakness globally?

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: Brian?

<A - Brian Sullivan - Alpha Natural Resources, Inc.>: We've - certainly if the current API2, as Kevin says, stays in the range that it's been, we've already seen a reaction in the first quarter for thermal exports and that's going to come down. I think we're looking at double-digit declines year-over-year in thermal exports. So, that's - it is very sensitive to, obviously, winter conditions in Europe. So, I would hesitate to draw a trend line based on one year of winter in Europe, just as we couldn't draw too many conclusions from a run up. So, I would say that we're going to see this year, certainly, probably, close to double-digit decline.

<Q - Dave Gagliano - Barclays Capital, Inc.>: Okay. That's helpful. Thank you.

<A - Kevin Crutchfield - Alpha Natural Resources, Inc.>: All right, David.

Operator: Ladies and gentlemen, due to time constraints, our final question will come from the line of Lance Ettus with Tuohy Brothers. Please proceed with your question.

<Q - Lance Ettus - Tuohy Brothers Investment Research, Inc.>: Hi, guys. Just had a quick question on the potential for more idling or I guess lack thereof. You obviously have a lot of your met coal already sold out for the year. Does this limit your ability to idle more mines, or could you kind of broke your way out of this given that these prices are above, certainly, the current market? We hope that the markets rebound with all of these production cuts. But it's certainly, those prices are above, and maybe you can make a deal with the customers and take the excess margin. I think Patriot did that years back and continue to idle a few if you see fit.

<A - Paul Vining - Alpha Natural Resources, Inc.>: Yeah, this is Paul. I mean, I think I'll answer it as I did before. We're pretty flexible. We're looking at cutting shifts and things like that, but I won't say that closing a mining complex, not a big one, is out of the question this year. And it really is going to depend on that pricing environment we see in the back half of the year.

<Q - Lance Ettus - Tuohy Brothers Investment Research, Inc.>: Okay. Thank you.

Operator: Mr. Crutchfield, I would now like to turn the floor back over to you for closing comments.

Kevin S. Crutchfield, Chairman & Chief Executive Officer

Thanks again to everyone for taking the time to be on the call this morning. While it's apparent that many external forces continue to challenge our business at the outset of 2014, we are confident the actions that we've taken in the areas that we do control have been appropriate and effective. Disciplined management of our cost structure, preserving our liquidity, pivoting our sales and marketing efforts between the domestic and export markets to capture opportunities as they arise, and of course, maintaining safe and productive operations.

We look forward to keeping you updated and we'll speak to you again next quarter. Thank you for attending today.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

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