Peabody Energy NYSE: BTU reported a second-quarter net loss attributable to common stockholders of $90.6 million, or $0.74 per diluted share, and adjusted EBITDA of $24 million, as lower U.S. thermal volumes and elevated commissioning costs at its Centurion metallurgical coal mine weighed on results.
President and CEO Jim Grech said the company made progress on operational and financial priorities during the quarter but acknowledged that the earnings result fell short of Peabody’s expectations. “$24 million of adjusted EBITDA is nowhere near the type of quarter that this platform is capable of or that we expect going forward,” Grech said.
Peabody exited the quarter with more than $500 million of cash and total liquidity above $900 million. The company also completed financing and surety-related transactions that it said strengthened its capital structure, reduced interest costs and released restricted cash.
Centurion Advances Toward Production Targets
Centurion remained a central focus of the call. Grech said the mine has addressed a shield-alignment issue that developed during its longer-than-expected commissioning process. The issue was labor-intensive and costly to resolve, but the longwall is now “in excellent shape,” he said.
The mine continues to encounter roof-control challenges in a faulted zone covering roughly 20% of the longwall face. Peabody expects to work through the zone during the third quarter and does not expect the issue to continue into the fourth quarter. Grech said the company has about 300 meters remaining in the affected area.
Centurion is targeting 1.5 million to 2 million tons of sales in the second half of 2026, including 500,000 to 700,000 tons in the third quarter. Grech said quarterly output could vary based on mining advance rates and processing yields while the operation moves through the faulted zone. Approximately 150,000 tons of projected third-quarter Centurion production is expected to come from continuous-miner coal, according to Grech.
The company said run-of-mine production, preparation-plant yields and rail shipments have improved in recent weeks. Grech said that when the longwall operates without interruptions, performance has been as good as or better than the company expected. Peabody expects costs to trend closer to long-range expectations as production rates improve in the second half.
Peabody plans to provide Centurion updates in August and September, including during an Aug. 11 site visit. The company said the mine’s longwall move will occur in 2027, though it has not yet provided timing or duration guidance for that work.
Segment Results Reflect Strong Seaborne Thermal Performance
Chief Financial Officer Mark Spurbeck said Peabody’s seaborne thermal segment shipped 3 million tons during the quarter, including 1.9 million tons of export coal. The average realized export price was $95.87 per ton, up 11.2% from the prior quarter and 31.6% from a year earlier.
Segment costs of $58 per ton were at the low end of guidance, producing a 23% adjusted EBITDA margin and more than $52 million of adjusted EBITDA.
Seaborne metallurgical shipments totaled 2.5 million tons, exceeding expectations by 200,000 tons because of higher output from Metropolitan and the CMJV. However, segment costs reached $155 per ton, above guidance due primarily to Centurion commissioning costs. The segment reported an adjusted EBITDA loss of $17 million, despite a 7% sequential improvement in realized pricing.
In U.S. thermal operations, Peabody reported $19.8 million of adjusted EBITDA. Powder River Basin shipments were 16.4 million tons, below the company’s 19 million-ton expectation, as mild weather extended into June and power plants completed longer maintenance outages. PRB unit costs rose to $14 per ton after the company moved an additional 11 million cubic meters of overburden to uncover coal, but Peabody expects costs to decline to about $12 per ton in the third quarter.
Other U.S. thermal shipments were 3 million tons, 400,000 tons below guidance, due to the extended shoulder season and heavy Midwest rainfall that delayed deliveries. The segment produced $26.9 million of adjusted EBITDA, with costs held at $46 per ton.
Market Conditions Support Second-Half Expectations
Chief Commercial Officer Malcolm Roberts said seaborne metallurgical and thermal coal markets remained constructive in the second quarter, while U.S. thermal demand was softer because of mild weather and lower natural-gas prices.
Premium hard coking coal averaged $238 per ton in the quarter, up 29% from the prior-year period, Roberts said. He attributed supply tightening in part to mine-safety inspections and curtailed production in China’s Shanxi province following a mine accident. Peabody estimates that 30 million tons of production were removed from supply during the second quarter.
Newcastle 6,000-calorie thermal coal averaged $137 per ton, more than 35% above the prior-year level, according to Roberts. He cited strong coal-fired generation across Asia and elevated liquefied natural gas prices amid Middle East conflict. Indonesia’s expected lower coal output could further constrain seaborne thermal supply, he said.
For the third quarter, Peabody expects:
- Seaborne thermal volumes of 3 million tons, including 1.9 million tons of export coal, with costs of $52 to $57 per ton.
- Seaborne metallurgical volumes of 1.9 million to 2.1 million tons, with costs of $130 to $140 per ton.
- Powder River Basin shipments of 22 million tons at costs of about $12 per ton.
- Other U.S. thermal shipments of 3.7 million tons, with an average price of $58.20 per ton and costs of $45 to $49 per ton.
Roberts said the company expects a seasonal increase in U.S. coal burn during the second half and indicated that the midpoint of Peabody’s U.S. thermal guidance is the appropriate assumption based on current grid demand conditions.
Capital Structure Actions Release Cash and Reduce Interest Costs
During the quarter, Peabody issued $250 million of 0.5% convertible notes due 2031 and used the proceeds, along with balance-sheet cash, to redeem $241.2 million of its 3.25% 2028 convertible notes for $386.8 million.
Spurbeck said the $145.6 million redemption premium effectively represented the repurchase of more than 5 million shares at a weighted average price of $28.92 per share. The transactions raised the average conversion price of Peabody’s convertible notes to $38.31 per share from $18.99, reduced diluted shares by 6.2 million and lowered annual interest expense by $6.6 million.
The company also revised its global surety arrangements, freeing $350 million of restricted cash and collateral. Spurbeck said that amount was fully available and included in cash balances as of June 30. Peabody increased its revolving credit facility to $400 million, extended its maturity to June 2030 and reduced borrowing costs by 25 basis points.
Year to date, Peabody generated $145.3 million of available free cash flow, including the release of restricted cash and collateral. It used $145.6 million for the convertible-note repurchase premium and paid $18.3 million in cash dividends, resulting in a shareholder payout ratio above 100% for the first half.
Grech said Peabody intends to continue executing its shareholder return program and may consider both open-market share repurchases and additional purchases of its remaining convertible notes, depending on market conditions.
About Peabody Energy (NYSE:BTU)
Peabody Energy Corporation is one of the world's largest private-sector coal companies, engaged primarily in the production and sale of metallurgical and thermal coal. The company's operations span surface and underground mines, serving utilities, steel mills and other industrial customers that rely on coal as an essential component in power generation and steelmaking. Peabody's product portfolio includes high-energy thermal coal for electricity generation and low-volatile metallurgical coal used in steel production, reflecting its diverse end-market reach.
Founded in 1883, Peabody Energy has grown from a regional mining concern into a global energy supplier.
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