Peabody Energy Q1 2025 Earnings Report

Peabody Energy EPS Results

• Actual EPS: $0.27
• Consensus EPS: $0.07
• Beat/Miss: Beat by +$0.20
• One Year Ago EPS: $0.30

Peabody Energy Revenue Results

• Actual Revenue: $937.00 million
• Expected Revenue: $976.57 million
• Beat/Miss: Missed by -$39.57 million
• YoY Revenue Growth: -4.70%

Peabody Energy Announcement Details

• Quarter: Q1 2025
• Date: 5/6/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 11:00AM ET

Peabody Energy (NYSE:BTU) engages in coal mining business in the United States, Japan, Taiwan, Australia, India, Brazil, Belgium, Chile, France, Indonesia, China, Vietnam, South Korea, Germany, and internationally. The company operates through Seaborne Thermal, Seaborne Metallurgical, Powder River Basin, Other U.S. Thermal, and Corporate and Other segments. It is involved in the mining, preparation, and sale of thermal coal primarily to electric utilities; mining bituminous and sub-bituminous coal deposits; low sulfur and high British thermal unit thermal coal; and mining metallurgical coal, such as hard coking coal, semi-hard coking coal, semi-soft coking coal, and pulverized coal injection coal. The company supplies coal primarily to electricity generators, industrial facilities, and steel manufacturers. It also engages in marketing and brokering of coal from other coal producers; trading of coal and freight-related contracts, as well as provides transportation-related services. The company was founded in 1883 and is headquartered in Saint Louis, Missouri.

Peabody Energy Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good day, and welcome to Peabody Q1 twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.

[Operator]

Please note this event is being recorded. I would now like to turn the conference over to Rick Sveck. Please go ahead.

[Vic Svec, SVP, Global Investor and Corporate Relations at Peabody Energy]

Well, thank you, operator, and good morning, all. Thank you for joining today to take part in Peabody's first quarter call. Remarks today will be from Peabody's President and CEO, Jim Grech, CFO, Mark Sperbeck, and Chief Marketing Officer, Malcolm Roberts. Following remarks, naturally, we will open up the call to questions. We do have some forward looking information today, and you'll find our statement on forward looking info in the release.

[Vic Svec, SVP, Global Investor and Corporate Relations at Peabody Energy]

We do encourage you to consider the risk factors referenced here, as well as those in our public filings with the SEC. And I'll now turn the call over to Jim.

[James Grech, President & CEO at Peabody Energy]

Thanks, Vic, and good morning, everyone. It's clear that Peabody has had an excellent start to the year. The platform demonstrated two significant attributes that I'll emphasize today.

[James Grech, President & CEO at Peabody Energy]

First, the balance and resiliency of our diversified global portfolio, and second, the ability of our team to manage to the market and control the controllables. I'll summarize some of our highlights before turning this call over to Malcolm. First of all, our Peabody team did a great job of cost control in the first quarter, coming in below our expectations for both the seaborne thermal and met coal segments. And our US thermal segments came in at the low end of our first quarter cost target range. Our ability to manage costs is a key driver of success at a time of cyclical market softness in the seaborne markets.

[James Grech, President & CEO at Peabody Energy]

Peabody also is on budget and ahead of schedule for the Centurion mine, with our ramp up of production slated for early next year. I'll remind investors that this is an operation projected to have a low cost structure and among the highest realizations in the steelmaking coal universe. So we expect Centurion to garner the highest margins in the Peabody system over time. I was also privileged to take part in a White House event several weeks ago. There, the President signed executive orders to revitalize The U.

[James Grech, President & CEO at Peabody Energy]

S. Coal industry and expand the use of coal fired generation. The orders are intended to halt a premature and ill advised retirement of coal generation. This comes at time of rising electricity demand and concerns around generation to serve growing US load for data centers, AI, and a return of American manufacturing. This occurs against a backdrop where coal plant retirements have been receding and the lifespans of U.

[James Grech, President & CEO at Peabody Energy]

S. Coal plants continue to be extended. Last quarter, I quoted the coal plant retirements that were deferred at 26 gigawatts. And the National Mining Association now tallies 35 gigawatts of deferrals. That's on a total installed base of 172 gigawatts.

[James Grech, President & CEO at Peabody Energy]

In 2024, the existing coal fleet only ran at 42% utilization compared with 72% at their historic levels. The coal plants can shoulder a heavier load of meeting US generation demands, including multiple years of data center growth. That's why our position is aligned with the administration's. We believe that all coal power generators need to defer U. S.

[James Grech, President & CEO at Peabody Energy]

Coal plant retirements as the situation on the ground has clearly changed. We believe generators should unretire coal plants that have recently been mothballed. We believe the existing fleet can and should run at much higher utilization levels than it has. And the last point, The US generating fleet has clearly run at higher capacity factors since the first of the year, with coal fuel generation up a stunning 20% over the prior year. It is clear that coal took market share from higher priced natural gas and other energy sources.

[James Grech, President & CEO at Peabody Energy]

Additionally, colder than average winter temperatures in early twenty twenty five led to increased heating demand, elevating coal consumption. I will note that no sooner was the ink dry in the executive orders than we received a call from a utility that we currently provide coal to. They were asking about our ability to supply coal on an extended basis for a major power plant that was on the drawing board for early closure. And just a week later, closer to home, we signed an agreement with Associated Electric Cooperative to supply coal requirements for two plants in Missouri. This agreement is expected to total more than 50,000,000 tons of our premium Powder River Basin coal.

[James Grech, President & CEO at Peabody Energy]

That would be seven to 8,000,000 tons per year for a minimum of seven years. I'll make a few points about this type of agreement. First of all, for those who continue to predict the demise of coal, we continue to see substantial US coal demand many years into the future. Second, rural electric co ops like Associated tend to be very close to their end customers. Their boards are often made up of ranchers, farmers, and business people who rely on abundant, reliable, and affordable power.

[James Grech, President & CEO at Peabody Energy]

And finally, Missouri faces some of the same new challenges of rising electricity demand that most states are grappling with. Missouri officials have raised alarms that they may not have the power to supply their expected load growth even before new data centers come to the state. We're aware of other Midwestern states that joined some coastal regions and needing to turn away economic growth opportunities since they can't promise a reliable power supply needed to meet this potential new demand. That simply shouldn't be happening in The United States in 2025. It can be directly linked to the short sighted rush in some states to replace reliable and affordable power sources with weather dependent, heavily subsidized intermittent power sources.

[James Grech, President & CEO at Peabody Energy]

I'll note that we are also seeing multiple states pass legislation this year that bolsters coal fueled electricity. These laws often require that any existing power generation replacements be online before coal plants potentially retire. And they also mandate that these energy forms be reliably dispatchable. That's something that weather dependent intermittent power sources such as wind and solar for all our benefits lack. As the largest U.

[James Grech, President & CEO at Peabody Energy]

S. Coal supplier, it's worth noting that it has been some time since we've seen policy trends and supply demand fundamentals both move in the right direction, that these are exactly the current market dynamics. That's a brief summary of highlights from recent months. I'll now turn to an update on Peabody's acquisition of premium steelmaking coal mines in Australia from Anglo American. Yesterday, we notified Anglo of a material adverse change that impacted Peabody's planned acquisition of the steelmaking coal assets from Anglo.

[James Grech, President & CEO at Peabody Energy]

The material adverse change notice relates to issues involving the Moranba North mine, which as you may know, remains inactive following what was described as a gas ignition event in March. While we have been nearing completion of the steps necessary to complete the acquisition, the issues at Moranbah North have created significant uncertainty around the acquisition. A substantial share of the acquisition value was associated with Moranba North. A number of facts have brought us now to our position that a material adverse change has occurred. I'll share several examples.

[James Grech, President & CEO at Peabody Energy]

First, standing here today, there is no known timetable for resuming longwall production. Second, we understand that workers had reentered the mine to conduct safety inspections only. Third, the Queensland Mining Union safety representative has stated in the media that he believes it will take a year or years to resume longwall production. Fourth, in conjunction with this incident, the Queensland government has called for a sweeping review into coal mining safety, which we expect could further delay a return to mining. And finally, Teabody's own experience is that recovery from mine ignitions can take longer, oftentimes much longer, than originally contemplated.

[James Grech, President & CEO at Peabody Energy]

Under the company's acquisition agreements, if the material adverse change notice is not resolved to Peabody satisfaction, and done so in a limited time frame specified in the agreements, then Peabody may elect to terminate the agreements. We obviously will keep the market apprised of major developments here. Malcolm, I'll now turn the call over to you to discuss global market fundamentals in more detail.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Thanks, Jim. I'll add a few details to your comments regarding US dynamics before turning to seaborne markets. There's no question that the strong start to US generation has drawn down stockpiles of both mines and customers. We estimate that US generator inventories have declined by more than 25% on a days burn basis since the beginning of

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

the

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

year. Elevated natural gas prices and the intermittent nature of renewables left a strong opening for US coal burn to increase, and it did. For the full year, the EIA is projecting coal generation to increase 5%, while US coal production declined 6%, which is a strong market fundamental as the year progresses. Year to date we have seen good interest in increased volumes as well as near maximums being taken under requirements contracts where we agree to supply all the coal a plant may need. Turning to seaborne thermal coal.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Thermal coal markets have been well supplied following a weak winter in Asia that both trimmed back demand and provided a backdrop for production. As a result, thermal coal prices reached four year lows in March. At sub-one hundred dollars thermal coal prices for high energy products we have begun to see some production rationalisation that can only be expected to accelerate the longer that thermal coal prices remain around current levels. The demand story for thermal coal remains intact, with 600 GW of coal generation under construction or in various stages of development, most of which is in Asia. For every coal plant retired in The US over the last decade, more than three plants have switched on in China and India.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Within seaborne metallurgical coal markets the beginning of the year has been weak as China has continued to increase steel exports and experienced soft domestic demand. When reviewing current met pricing, one true axiom is that one cannot predict future prices. But as we look through past cycles there are certain elements that need to be in place before market improvement. We see many of those elements today. The average five year benchmark price is $80 above March spot levels and at our lowest mark in nearly four years.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

We estimate that more than 100,000,000 metric tonnes of seaborne met coal production are underwater at March spot prices, representing some 30% of total seaborne met coal supply. This suggests supply will come out of the market and support a recovery in prices. Almost on cue, we've seen prices rebound modestly from the March low, and we'll see what traction that gains. We do note that supply has begun to look increasingly challenged with economics, wet weather in supply regions, and unscheduled production outages all combining to result in a much tighter market where we sit today than where the market was at the March. It has been our view that the second half will be stronger with blast furnaces in India coming online.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

We continue to see India taking over the growth in global metallurgical coal demand in coming years. Finally, a word on tariffs. While the ultimate impact of tariffs may be most felt in an easing of global GDP, we remain optimistic this will be a temporary phenomenon. I would like to point out that China and tariffs have proven to be an immaterial issue for Peabody, as less than half a percent of Peabody's volumes were flowing from The US to China. This small volume is now being placed in other markets, and of course, we input no coal into The US.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

That's a brief review of coal market dynamics. I'll now turn over to Mark.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Thanks, Malcolm, and good morning. I would like to echo Jim's comments on our strong start to the year and add a bit more insight on the financial results. In the first quarter, we recorded net income attributable to common stockholders of $34,000,000 or $0.27 per diluted share and adjusted EBITDA of $144,000,000 Amid challenging market conditions, Peabody's diversified global coal portfolio and strong balance sheet continued to deliver value for shareholders. Favorable cost performance across all segments and better than anticipated volume from the seaborne thermal platform drove strong EBITDA results. We generated $30,000,000 in free cash flow, net of $47,000,000 of continued development at Centurion.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

From a balance sheet perspective, at March 31, held nearly $700,000,000 of cash and had over $1,000,000,000 of liquidity. Our reclamation obligations remained fully funded and we continued our cash positive net debt position. And we again declared a $0.75 per share dividend. Let's now review segment results. The seaborne thermal segment recorded $84,000,000 of adjusted EBITDA and 32% margins.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Wilpinjong exceeded production forecasts, exporting an additional 400,000 tons, and the segment achieved average cost per ton $6 below first quarter guidance. The seaborne thermal platform continues to deliver high margins throughout the cycle. Over the last three years, adjusted EBITDA has outpaced capital expenditures by a nine to one margin, driving nearly $1,500,000,000 in cash flow. The seaborne metallurgical segment reported $13,000,000 of adjusted EBITDA. With lagging market conditions, we slowed the return from a longwall move at Shoal Creek and increased stockpiles, resulting in sales modestly below company targets.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

The team did a good job reining in costs here as well, achieving $12 per ton better than expected. The US Thermal Mines generated $69,000,000 of adjusted EBITDA in the first quarter. This business epitomizes stable cash flows and low capital reinvestment. 2025 business is fully contracted at planned production levels and meaningful pieces of 2026 and 2027 are already in the books. The PRB mines exceeded expectations for the quarter by shipping 19,600,000 tons given the sharp increase in coal fuel generation that Jim noted.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

With a strong start to 2025, the company anticipates increasing demand throughout the year. PRB costs were at the low end of expectations and the segment generated $36,000,000 of adjusted EBITDA. The other U. S. Thermal mines delivered $33,000,000 of adjusted EBITDA.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Sales were modestly less than expected as the company replenished stockpiles following a longwall move at 20 Mile. Compared to the previous quarter, costs per ton were down 6% and at the low end of company expectations. Looking ahead to the second quarter, seaborne thermal volumes are expected to be 4,000,000 tons, including 2,500,000 export tons, 800,000 of which are priced on average at $77 per ton, while 1,000,000 tons of Newcastle product and 700,000 tons of high ash product are unpriced. Costs per ton are expected to be between $45 and $50 per ton, more in line with full year guidance after first quarter's outstanding performance. Seaborne met volumes are expected to be 2,200,000 tons, a significant increase from Q1 results as both Shoal Creek and the Capabella Moorvale joint venture returned to full year production run rates.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Costs are expected to be between $120 and $130 per ton as we have a longwall move at Metropolitan and we continue to reconfigure Capabella for long term success. In the PRB, we expect to ship 19,000,000 tons, slightly lower than last quarter as we enter the traditional shoulder season. Costs are expected to be up modestly for the quarter in the range of $12.5 to $13 per ton due to lower anticipated shipments. The other US thermal coal shipments are expected to increase over the first quarter to 3,300,000 tons, as 20 mile returns to normal production levels. Costs are anticipated to be between $41 and $45 per ton, a little better than the first quarter on higher anticipated volume.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

In summary, we delivered a strong first quarter, remained laser focused on cost containment in a soft price environment and achieved development rates ahead of plan at Centurion. Together with the second quarter, we expect to be right on plan through the first half of twenty twenty five and positioned for an even stronger second half of the year. Jim, I'll now turn the call back to you.

[James Grech, President & CEO at Peabody Energy]

Thanks, Mark. I'll conclude by saying I trust what you have seen here today is what I see every day when I look at Peabody, a management team that has delivered and is committed to delivering strong results across all cycles, a business that is very well situated against the macro trends moving through the system, a portfolio that is well positioned and improving in its ability to maximize margins and generate substantial cash flows. And a leader in our industry with our large scale, broad diversification, superior quality product mix, and long lived asset base that will be working to create increasing shareholder value for decades to come. In total, a company I'm extremely proud to be part of, one you can be proud to be associated with. Operator, we can now open up the line to questions.

[Operator]

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, Our first question comes from Nick Giles Riley Securities.

[Operator]

Please go ahead.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Thank you, operator. Good morning, everyone. Guys, I first wanted to say nice job on the quarter here. My first question with yesterday's announcement of your notification of a MAC related to Morinbah North, you mentioned a few factors that you believe constitute a MAC. And I was curious if you could outline what the process could look like from here.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

You know, I can appreciate these things take longer. Is there a view that the mine could be at risk of being permanently sealed, or is it a matter of, taking longer than currently outlined? Thank you very much.

[James Grech, President & CEO at Peabody Energy]

Hey Nick, thanks for joining us on the call. And as you said, we got off to a really good start for the year. Very proud of what the company has accomplished in the first quarter in setting us up for the rest of the year. I think he asked two different questions there. One is on the timing, and then I think the second was about the MAC itself and what constitutes it.

[James Grech, President & CEO at Peabody Energy]

So on the first one, on the timing, there's a ten day period which ENGL has to formally respond back to us on the MAC itself and how they intend to go forward. And then after that, it could be up to ninety days or less to work through a cure period. So it sort of sets the boundaries there of where we're at on timing, and there's quite a few variables in there that could affect the ninety days to make it a shorter period. But that would be the outermost length of time to try to agree on some type of cure. And so, on your other question, on the MAC itself, I will say that we said there was, I cited some variables in my comments.

[James Grech, President & CEO at Peabody Energy]

And we are under NDA, so there's only so much information that we can put out there. I will say though that we have employed quite a few technical experts, consultants, plus our own internal team, and we went through a very rigorous analysis of the situation and its potential impacts. And we view them to have the potential to be very, very significant. So, in elaborating on the comments that I made just a few moments ago, as we stand here today, there is no known timetable for resuming longwall production sustainably. That is just not known.

[James Grech, President & CEO at Peabody Energy]

And it isn't even known if the current longwall will ever run again. That is not known at this point in time. Our own experience has been from mine ignitions. The timelines can take long or even longer than you anticipated. And in our experience, unfortunately, had us sealing in a long wall.

[James Grech, President & CEO at Peabody Energy]

We also understand, as I noted, that the workers have not yet reentered the mine to do any production work, only to do inspections. We're getting on forty days here now where no work other than inspections, no production work has been done in that mine. So to have a timeline that says from when the ignition occurred to along while running sustainably in three to four months, to us does not seem reasonable and is again part of the data that we've used in analysis to do the MAC. And the last point I'd like to make there, Nick, is the Queensland Mining Union Safety representative has stated in the media that he believes it will take a year or years to resume longwall production. So again, based on a lot of data that we didn't cover and the facts that I've just talked about, and a very rigorous technical analysis and economic analysis, we feel very comfortable with the MAC notice that we've given to ANQEL.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Jim, I really appreciate all those comments. This is very helpful. Assuming that a MAC has in fact been triggered, you did note in the release yesterday that Peabody may elect to terminate the agreement if the MAC is not resolved. Maybe just a clarifying question on your comments there. Should we assume that this resolution would be not only a resumption of longwall mining but a sustained resolution, sustained longwall mining?

[Nick Giles, Senior Research Analyst at B.Riley Securities]

So to you, does that look like? Would there be a target level of production in mind? Just any more color around that would be helpful.

[James Grech, President & CEO at Peabody Energy]

Yeah, Nick, I'm not going to get into too many details here. I don't want to get into negotiations on our earnings call. But I'll just say that we need to see a sustainable longwall production, a longwall that is up and running well for a period of time. And so I'd just like to leave it at that, and we'll see where that takes us, if anywhere, in future discussions.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Hey, fair enough. One more if I could. I mean, how should we think about the permanent financing processes, these issues at Moranba North play out? Should we assume those discussions are on hold or any color you could share around that?

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Good morning, Nick. It's Mark. Yeah, with regards to financing, kicked off our marketing and well across nearly 50 firms, very strong interest in underwriting the transaction, large support. Unfortunately, when we were scheduled to kick off our management discussions and meetings with these investors, the event happened the very same day. We held those conversations, But it's clear now that with all of the uncertainty around Moranbah North and as Jim mentioned, this most significant piece of the transaction, investors much like us aren't willing to underwrite that uncertainty.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

So until further clarity is noted, financing is on hold.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Guys, again, I really appreciate all the comments. Continued best of luck.

[James Grech, President & CEO at Peabody Energy]

Thanks Nick.

[Operator]

Thank you. Your next question comes from Chris Lafamena from Jefferies. Please go ahead.

[Chris LaFemina, Analyst at Jefferies Financial Group]

Hey, guys. Thanks for taking my questions. I have a few questions related to the Anglo deal. The first is just on the MAC itself. I mean Moranbah North has a history of gas related safety stoppages and Anglo had always talked about, you know, the risks in the mine had grand disability issues and again high levels of gas and they've had incidents in the past and you know, obviously this one seems to be a little bit more severe, but it's not really that inconsistent with what we've seen historically in this asset.

[Chris LaFemina, Analyst at Jefferies Financial Group]

So, the first question is, what's different about this event that makes it a materialized risk change versus what we've seen historically in this mind?

[James Grech, President & CEO at Peabody Energy]

You know, Chris, again, I'm not going to start getting into past events versus this event. I'm just going to comment on our belief under our agreements with ANGLE that this constitutes a MAC from where we sit today. And again, on the points I just made in responding to Nick, we feel very, very confident in our approach and the claim that we've made based on the data that we've done with this incident.

[Chris LaFemina, Analyst at Jefferies Financial Group]

Okay, thanks. And then secondly, on timing. So, Anglo has a ninety day response period to present a MAC cure. And if it's your satisfaction, obviously the deal can still go forward. And if it's not, if we assume that there's some progress, what has to happen for the long stop date extension to kick in?

[Chris LaFemina, Analyst at Jefferies Financial Group]

Because I mean, I think there's two different extension options, which should actually take us to early next year or middle of next year. And, you know, obviously the more time that we have, the more likely it is this mine can actually come back online. So do you have to agree with the request for a long stop extension in order for that to actually happen, or does Anglo have to prove that there's progress and there's an arbitrator that decides on that? How does that all work?

[James Grech, President & CEO at Peabody Energy]

Chris, you got a lot of questions or a lot of different points in there. And again, for the process that we have here with the MAC, they have ten days to respond how they wish to go forward or not. And if we're going to try to cure, it could be up to ninety days to work through that process. And I'll just state again, we have to be satisfied with the cure to accept it. And if not, we do have the option to proceed with the termination.

[James Grech, President & CEO at Peabody Energy]

So the long stop date in what you're talking about I think has to, know, to, again, not trying to get into this too much, I think that's referring to just the closing process of the sale. And that's a different process. So don't get the two of them intertwined with each other.

[Chris LaFemina, Analyst at Jefferies Financial Group]

Okay, got it. And then finally, just in terms of different possibilities here. I mean, you know, if we assume that this mine comes back online, well, then the deal will close. If if the mine is permanent, I would think would would trigger clearly a Mac. But what if there's a kind of a scenario where there's a timeline, but the timeline is relatively long?

[Chris LaFemina, Analyst at Jefferies Financial Group]

And would you consider various different structures around the deal? So for example, in the initial transaction, you have these contingent deferred payments on a Grovenor restart. Is that the kind of thing you consider from Warren by North as well? I mean, it really around structure and price and you still want to get the deal done if you're confident that this mine can come online even if you do have the option to walk away from the deal because of the MAC? Sure if I asked that question well, but I think

[James Grech, President & CEO at Peabody Energy]

you have question. You asked it well, Chris. But I'm just not going get into speculation on different structures, how this can be solved going forward. We'll get into those discussions with Anglo. I'm looking forward, hopefully, to getting into those constructive discussions with Anglo.

[James Grech, President & CEO at Peabody Energy]

I will just say that however we go forward, there just has to be a recognition that there is a significant value impact on Moranba North because of this situation. And again, a pathway to sustainable longwall performance is a key thing that we'll be looking for.

[Chris LaFemina, Analyst at Jefferies Financial Group]

Got it. Thanks, guys. Good luck.

[James Grech, President & CEO at Peabody Energy]

Thanks, Chris.

[Operator]

Thank you. Your next question comes from Katya Janik from BMO Capital Markets. Please go ahead.

[Katja Jancic, Analyst at BMO Capital Markets]

Hi. Thank you for taking my questions. Maybe just one more quick one on the acquisition side. I think you mentioned that all financing is not now on hold. Does that also include potentially selling any minority interest in the Centurion line?

[James Grech, President & CEO at Peabody Energy]

Kotia, there is no correlation or tie in between the two processes. They go forward or not completely independent of each other. They were not intertwined in any way, fashion, or means at all. Now, the centurion process, we have been exploring and continue to explore a potential partial sale. We've had a very, very robust response to that.

[James Grech, President & CEO at Peabody Energy]

But we're still real early in the processes of deciding whether we want to proceed or not on that. It's still early days on that. But again, I'll make it very clear. There is no correlation between any potential sale of any aspect of Centurion and the angle process.

[Katja Jancic, Analyst at BMO Capital Markets]

Okay, that's good. Thank you. And then maybe focusing a little bit on the cost. Obviously, a very good quarter on the cost side. But then when I look at second quarter guide, can you talk about why we're going back to more annualized numbers?

[Katja Jancic, Analyst at BMO Capital Markets]

What are some of the puts and takes that really drove the first quarter cost down and these that potentially are not repeating in second quarter?

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Good morning, Katja. Yes, a couple of things to note. First quarter performance is absolutely outstanding and want to thank all of our mine general managers and operations leadership for really turning in a strong performance in first quarter. Laser focused on costs, we saw a reduction in overtime shifts and contractors and improved productivity. So really off to a great start to 2025.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

When we look at volumes coming down in the second quarter in the PRB quarter over quarter, see the same thing in seaborne thermal. Seaborne met, we do see some volumes increasing quarter over quarter but costs going up. There I'll remind you as we talked last quarter that we continue to reset Capabella for long term consistency and success. For the full year we're gonna move about additional 6,000,000 BCMs which is expected to increase segment costs nearly $5 a ton for the full year. We got a good start to that in first quarter, but less than ratable.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

So we're expecting more of that in the second quarter. So you can see that right now we're definitely trending toward the low end of some of those cost guidances for the year. I do see upside in seaborne met costs. I do see upside in seaborne thermal costs. And as Jim noted and I as well in the remarks, I see upside in PRB volumes going forward with strong demand and strong start to '25.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

So we've had a really good start to the year. We're one quarter into the year. We haven't changed our full year guidance but are definitely trending in the right direction.

[Katja Jancic, Analyst at BMO Capital Markets]

Thank you.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

You're welcome.

[Operator]

Thank you. Your next question comes from Nathan Martin from The Benchmark Company. Please go ahead.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Thanks, operator. Good morning, everyone. Congrats on the quarter. I'm going to come to the Shoal Creek mine for a second. You guys mentioned a slower restart of the longwall there due to market conditions.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Is this just a lack of demand, low price, maybe a combination of both? And then with net cost in the first quarter well below guidance, I mean, Mark, you just highlighted some of the items there, even on fewer shipments. Did the delayed restart Shoal Creek have anything to do with that? Did that help? How should we think about that mine going forward this year?

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Malcolm here. I'll let Mark talk to cost. Look, what we saw during the quarter for I think everyone in The US saw this, but during March it was a pretty bleak period looking to put product, particularly high vol product, into the market. There was a lot of threats of retaliatory tariffs and the like, and the spot market dropped to, on a short basis, potential for high vol product, very close to 2 figures. We were seeing others do deals at those types of levels and we decided to hold some volume back.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

So to give you an idea, we held back about 170,000 of sales we otherwise would have planned to have made. The market's recovered from there. The China issue, people have rebalanced volumes and the like, so we've got through that. But it was prudent to hold off the restart of the longwall because we wanted to be sure that we had the product placed for the next quarter, and you don't want to stop along once you've started it. So that was really what we did there.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

I think that may have helped cost, but Mark might be able to help you a bit with that.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Yeah, sure, Nate. Shoal Creek did not help improve cost in the first quarter. It actually probably impaired it a bit with the lower production increased costs there. Shoal Creek is not is probably below our average cost for the full segment. So really the first quarter performance was just outstanding productivity and cost management at the other mines.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Okay, that's helpful. Just maybe a follow-up there. I mean, blast I think high vol A index is around $176 of a metric ton today. If we look at the netback there, Malcolm, like does that look like? Are you guys still making a margin?

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

It sounds like you should, based on Mark's comment, that it's one of your lower cost met mines.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Yeah, look, this will be the third quarter that I talked to this issue. And the issue is that there's a HOMOL index, which is an FOB index predominantly supplied into the Atlantic market. But the Atlantic market is pretty lackluster in demand at this time. So you've really got to look at what the delivered price is into Asia, and at the moment the delivered price into Asia is somewhere between say $160 and $170 and the freight on that is somewhere between $30 to $35 So that gives you an idea on a metric basis what the netback would be FOB. So a little way below the high vol A index would be how I see it.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Okay. Appreciate that. Then shifting over to the seaborne thermal segment, obviously strong quarter there in the first quarter, '4 point '4 million tons sales above your original guidance. It's like 2Q guidance is 4,000,000 tons. So that puts you guys at what 8,400,000 tons in the first half, which we annualize as well above the high end of full year guidance.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

So maybe talk to us a little bit about what's expected in the second half? Is there something that's going to weigh on shipments or could we be positioned to maybe improve on that full year guidance range?

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Nate, a couple of things. First, remember that the Wambo underground mine is coming offline mid year end of production there. So we won't see any production in the second half of the year from the Wambo underground for that segment. I'd also say Wilpinjong had a very, very strong first quarter as we noted an additional 400,000 tons above expectations. That will not repeat itself.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

So pull that out and you're looking at lower production from Wilpinjong in the second half of the year as well.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Got it, Mark. Thanks for that reminder. And then maybe finally, Jim, you mentioned attending the signing of the executive orders aimed at supporting US coal production and coal fired power generation. You called out a couple of items, but maybe it'd be great to get some additional thoughts on how you think some of these could impact your business, whether it's federal leasing or two year waivers from Mats or any other potential changes. Thanks.

[James Grech, President & CEO at Peabody Energy]

Yeah, Nate. As far as leasing goes, that really doesn't have any impact on us. We have very strong leases and we have decades and decades of reserves. If there's some decreases in royalties which would be occurring, that would be certainly helpful to us. But our position is really strong.

[James Grech, President & CEO at Peabody Energy]

And our leases out West or in the Midwest with the reserves we control as well. And I think the most impactful, there's a lot of changes, lot of regulations. It's sort of dizzying when you look at everything the EPA tried to do over the past years to damage coal fired generation and to undo that. We can talk for hours about all of the things that have to be done. And I will say that through the executive orders and the meetings that we've had with the EPA, with the DOE, and the DOI, they're focused on all of those items.

[James Grech, President & CEO at Peabody Energy]

But if I had to give you one specific thing, Nate, it's the edict to not close down any more coal plants and to look at unretiring recently mothballed ones and giving that support so coal generators can feel comfortable to keep the plants open and to start contracting out for those plants. And I gave the one sort of example, and I'll say it's generic because we've had more than one of coal consumers contacting our marketing team to now start supplying them coal again or for longer terms when they thought those plants were going be shut down. And of course, the associated contract, which we have been working on some time, as they are very committed to their cogeneration and a long term relationship with us. But to enter into that seven year agreement for the substantial tons is what we're seeing is, again, much more interest to enter into term agreements. And I'll tie both of those together as it relates to Peabody.

[James Grech, President & CEO at Peabody Energy]

If you're a coal consumer and you want to make sure you have a reliable supply of coal for your plant for many years, you want to go to a low cost producer or a producer that has reserves to back up these long term commitments. And our U. S. Assets check all those boxes for our customers.

[Nathan Martin, Equity Research Analyst at The Benchmark Company LLC]

Very helpful, Jim. I'll leave it there. Appreciate the time, gentlemen. And best of luck.

[James Grech, President & CEO at Peabody Energy]

Thank you, Nate.

[Operator]

Thank you. Your next follow-up question comes from Nick Giles from B. Riley Securities. Please go ahead.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Thanks for taking my follow-up. Nate asked it well. So I'll turn to the agreement with associated, which is nice to see. Maybe just to ask it in a different way. Does this agreement change the way you're thinking about deploying capital in the PRB or at your other U.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

S. Thermal mines? And then is there any color around pricing and margin that you can provide? I'm not sure we've seen the agreement flow through to PRB spot prices, but obviously this could be impacting duration. So appreciate any color.

[James Grech, President & CEO at Peabody Energy]

So Nick, I think Mark made the point, and we've made them at other times, that our US assets are very, very low capital for the amount of cash flow that they generate. And we've always invested in them with the expectation that those mines are gonna be running for the life of their reserves. So we've never shortchanged the capital on them, And that's part of the commitment we've made to our customers that while other coal companies may be wavering or other coal generation plants may be looking to shut down, we're going to be here for you. You can count on us. And we're investing to be here for you.

[James Grech, President & CEO at Peabody Energy]

So it doesn't change at all what we're doing with our capital investment or our maintenance, because we've always been situating ourselves to be here for the long term and to have very good margins. Now, I think the second part of your question, if I was trying to understand, Nick, were you asking specifically about the pricing mechanisms in the associated contract? Was that what you were asking about?

[James Grech, President & CEO at Peabody Energy]

Nick, I'd just say that it gets into the confidential nature of the contract. I'm not sure we're really free to be talking about the pricing mechanisms within that contract. But if you want to talk about I guess all I'll say is, Anit, it's market based. I'll just leave it at that, if that's helpful, Nick. And I won't go any further than that.

[James Grech, President & CEO at Peabody Energy]

And if you're talking about the rest of our portfolio and the margins the contracting, I think I'll just refer back to what we have in the guidance maybe as best to answer that, because it's sort of a broad question, Nick. If there's something more specific, we'll happy to follow-up with you on that. But does that give you enough of what you're looking for?

[Nick Giles, Senior Research Analyst at B.Riley Securities]

That's enough. I guess maybe, you know, asked in a different way, you know, you're still generating a healthy margin in the PRB, and what should give us the confidence that we can underwrite a margin like this into the long term, especially if PRB volumes could decline?

[James Grech, President & CEO at Peabody Energy]

Well, I think there's a few things. First off, you can look at our track record and our history, and you can look at the strength of our reserves. So, cost structure and what we've been specifically in the last six months to nine months, what we've done with our cost structures, I think you can expect to see us that going forward and with that. So, on the cost side, the basis of our reserves, how we've historically performed, I think should give you all the confidence in the world for that. And then, you know, going forward, market prices are always a product of supply and demand.

[James Grech, President & CEO at Peabody Energy]

And we have the best reserve position in the basin. We have the lowest cost reserve position in the basement. Other producers are here for the time that we can be here, I'll leave that up to somebody else to comment on. But we feel very, very good about our position compared to other companies. And the demand side, for all the things we talked about, has a lot of tailwinds behind it.

[James Grech, President & CEO at Peabody Energy]

So, at today's prices or stronger prices, our costs are gonna be very predictable, and we feel very good about those margins.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Jim, that's all very helpful. And I agree that your competitive advantage in the PRB is underappreciated. So, I could sneak in one more. Nice to see Centurion ahead of schedule. Apologies if I missed it, but what was the spend towards Centurion in Q1 and what remains in 2025?

[James Grech, President & CEO at Peabody Energy]

Nick, I'll give that one over to Mark to respond to.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Sure, Jim. In the first quarter, we spent $47,000,000 toward the development of Centurion. When you're looking at the total to get that longwall into production in the Southern District, there's about $150,000,000 left.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Got it. Appreciate it. Thanks

[Nick Giles, Senior Research Analyst at B.Riley Securities]

for your time.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Alrighty. I think it's

[Mark Spurbeck, EVP & CFO at Peabody Energy]

really quite an achievement. I think Nick, lot of people miss appreciate that as well that we fully funded and self financed the entire development of Centurion. When you include the North, the acquisition awards well, we've spent $540,000,000 to date on that all self financed while still continuing to provide shareholder returns and dividends. So looking forward to getting that done, that thing should be in longwall production first quarter next year.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Good to hear, guys. Thanks again for all

[Nick Giles, Senior Research Analyst at B.Riley Securities]

the color. Best of luck.

[Mark Spurbeck, EVP & CFO at Peabody Energy]

Thank you, Nick.

[James Grech, President & CEO at Peabody Energy]

Hey, thank you operator. Thank you operator and thanks to everyone for the time today. I also want to give recognition to our Peabody team and our continued focus on safe, low cost, environmentally responsible operations. So we look forward to keeping you up to date on our progress as the year rolls on. Thank you.

[Operator]

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Vic Svec, SVP, Global Investor and Corporate Relations
• James Grech, President & CEO
• Malcolm Roberts, Chief Marketing Officer
• Mark Spurbeck, EVP & CFO

Analysts

• Nick Giles, Senior Research Analyst at B.Riley Securities
• Chris LaFemina, Analyst at Jefferies Financial Group
• Katja Jancic, Analyst at BMO Capital Markets
• Nathan Martin, Equity Research Analyst at The Benchmark Company LLC