Download - MEE Massey Energy Dec 2009 Presentation
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
1/35
Massey Energy CompanyBank of America Merrill Lynch
Global Industries ConferenceDecember 8, 2009
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
2/35
2
Massey Energy Overview
#1 Coal producer inCentral Appalachia
93 years ofcontinuous operations
23 resource groups 62 active mines
41.1 million tons
produced in 2008 79% Steam Coal
21% MetallurgicalCoal
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
3/35
3
Massey Operating Region
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
4/35
4
Growing Reserve Base
Proven and Probable Reserves
0
500
1,000
1,500
2,000
2,500
87 89 91 93 95 97 99 01 03 05 07
M
illionsofTon
2.3 bil lion tons of total reserves2.3 bil lion tons of total reserves 50 years of reserves at current product ion level50 years of reserves at current production level
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
5/35
5
Safety Leadership - Innovations
Massey stripes
Roof flappers Covered man trips
Stock car netting
Pizza pans Submarine equipped
dozer cabins
Self-contained firefighting car
Belt fire suppression
system
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
6/356
Safety History - NFDL
Massey vs. Industry
0.00
2.00
4.00
6.00
8.00
10.00
12.00
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Massey
Industry
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
7/357
Tons Produced
41.1
0
5
1015
20
25
30
35
40
45
(Millions)
2004 2005 2006 2007 2008
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
8/358
Adjusted EBITDA*
$640.7
$0
$100
$200
$300
$400
$500
$600
$700
(M
illions)
2004 2005 2006 2007 2008
*2008 adjusted EBITDA excluded $250.1 million of expense related to Wheeling Pitt Litigation
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
9/359
Cash and Liquidity
$0
$100
$200
$300
$400
$500
$600
$700$800
(Million
s)
Dec. 312004
Dec. 312005
Dec. 312006
Dec. 312007
Dec. 312008
Sept. 302009*
Cash and Equiv. Avai lable Credit Restricted Cash
* $72 million in restricted cash posted as appeal bond for Harman litigation will revert to cash.
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
10/3510
Net Debt to Equity
31.3%
0%
10%
20%
30%
40%
50%
60%
Dec. 31
2004
Dec. 31
2005
Dec. 31
2006
Dec. 31
2007
Dec. 31
2008
Sep. 30
2009
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
11/3511
2009 First Nine Months Results
Produced coal revenue of $1.8 billion
Net income of $80.1 million
EBITDA of $373.8 million
Utility coal shipments increased 8 percentcompared to first nine months of 2008
Utility coal shipments for the CentralAppalachia industry declined 7 percent
Reduced headcount
Implemented cost cutting measures
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
12/3512
Total Coal Production
United StatesU.S. Coal Production by Region - 2008
Region Tons (000) BTUs(Quadrillions) Percent ofTotal BTUs
Powder River Basin 541,369 9,528 38%
Central Appalachia 235,466 5,887 24%
Northern Appalachia 133,322 3,466 14%
West (Other than PRB) 133,000 3,112 13%
Midwest 99,485 2,348 9%
All Other 27,545 606 2%
Total 1,170,187 24,947 100%
Source: Energy Information Administration, Company estimates
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
13/35
13
CAPP
Challenges and Concerns
Permitting issues
Regulatory issues
Safety
Environment
Litigation
Geologic challenges Railroad performance
Fuel Switching -Natural gas prices
Scrubber technology
implemented PRB and Illinois basin
market penetration
Customers meetingcontractual obligations
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
14/35
14
Central App. Coal Demand
0
50
100
150
200
250
ShortTons
(Millions)
2006 2007 2008 2009 2010
-17.7%*
-9.2%
Source: Energy Ventures Analysis
Note: Includes export steam coal
Actual Forecast
Thermal Coal Met. Coal* Actual production through September was down
11.3% per EIA
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
15/35
15
CAPP Fragmented Production2007 (short tons, millions)
Massey Energy Company 39.5 17%
Patriot Coal 25.9 11%
Alpha Natural Resources 17.3 8%
Arch Coal 12.5 6%
Consol Energy 10.0 4%
TECO Coal 9.1 4%
James River Coal 8.9 4%
International Coal Group 8.4 4%
Foundation Coal 6.9 3%
Rhino Energy 5.4 2%
Alliance Resource Partners 3.2 1%
Arcelor Mittal 2.1 1%
PinnOak 1.8 1%
Sun Coal 1.2 1%
National Coal 1.2 1%
Subtotal 153.4 68%
Other Producers 73.3 32%
CAPP Total 226.7 100%
Source: Energy Ventures Analysis, EIA reports, OpenSourceCoal.org
More than 100private producers
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
16/35
16
Industry Consolidation
Depletion remains the largest factor forcing consolidation,in Central Appalachia
Producers are seeing the end of coal commitments pricedlast year and high cost producers are facing shut-downs
Producers are facing permitting, capital and liquidity
constraints Historically, distressed assets become available in weak
markets
Few sophisticated and capable buyers Current economic environment will benefit the stronger producers
Massey is prepared to use a portion of cash reserves foracquisitions
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
17/35
17
The Truth About
Central Appalachia
CAPP coal is like fine art..
As CAPP depletion, over-regulationand consolidation continue, causingregional production to decline,
Masseys reserves and productionbecome increasingly more valuable,
not less.
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
18/35
18
Global Coal Demand
Oil Nat. Gas Coal Nuclear Hydro
Coal represented 29%of global primaryenergy consumption
in 2008
Coal was the fastest
growing energysource for the 6th
consecutive year
Global Primary Energy
Consumption(Million tonnes oil equivalent)
3,928
2,726
3,304
718620
Source: BP Statistical Review of World Energy 2009
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
19/35
19
Global Coal Demand
Coal Oil Nat. Gas Nuclear Hydro Other
Total World Electricity Generation
By Fuel (2006)
41%
6%20%
15%
16%
Source: World Coal Institute
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
20/35
20
Global Steel Production
Nearly 70% of totalglobal steel productionis dependent on Coal
Chinas steelproduction increased10.5% in the first tenmonths of 2009
U.S. steel productionremains at approx.50% of capacity
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
21/35
21
U.S. Metallurgical Coal
Demand Domestic and export met demand are expected to decline by 24
mm tons in 2009 and then begin increasing in 2010.
Source: Energy Ventures Analysis, Company Estimates
Note: The numbers exclude imported met tons.
0
10
20
30
40
50
60
70
2006 2007 2008 2009 2010
Export Domestic
Actual Forecast
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
22/35
22
Blast Furnaces Restarting
A few examples:
Corus South Wales
US Steel Serbia
US Steel Ontario
Arcelor Mittal Belgium
Arcelor Mittal Indiana Harbor
China Steel Corp. - Taiwan
Over 40 blast furnaces restarting representing over 60million tons of annual production capacity
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
23/35
23
Metallurgical Coal Exports
0
1,000
2,000
3,000
4,000
5,000
6,000
ShortTons(000
)
9 mos YTD 08 9 mos YTD 09
Met Exports from
SE Atlantic Ports
South Am. Asia
Industry exportsfrom SE Atlanticports to South
America and Asiawere up nearly
54% in first eightmonths of 2009
Source: Energy Ventures Analysis, Company Estimates
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
24/35
24
New Opportunities
Atlantic Basin will continue to be natural
home for our exports
Emerging markets are driving global
growth As developed nations recover, emerging
markets become attractive destination forour products
BRIC
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
25/35
25
- Positioned to Win -
CAPP Reserve Share Massey could have ~40% of CAPP reserves
by 2015
Notes:(1) Assumes that each year after 2009 Massey acquires reserves equal to the production for that year. CAPP production based on EVA estimates(2) CAPP reserves based on internal and JT Boyd estimates
0
2,000
4,000
6,000
8,000
10,000
12,000
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Reserves(MillionsofTons
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
M
EEas%o
fCAPPRe
serve
MEE CAPP MEE/CAPP
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
26/35
26
- Positioned to Win -
Product Diversity
High-VolMet Coal
Low-VolMet Coal
Mid-VolMet Coal
Low SO2Steam Coal
Hi-SO2Steam Coal
Custom BlendIndustrial Coal
Mid-BtuSteam Coal
High-BtuSteam Coal
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
27/35
27
- Positioned to Win -
Metallurgical Coal ReservesMassey Reserves
2.3 bill ion tons total
Met Coal Steam Coal
1 billion tons ofMasseys reserveshave met coal
quality andcharacteristics
Believed to be the
largest met coalreserves in US
1.0 billiontons
1.3 billiontons
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
28/35
28
- Positioned to Win -
Metallurgical Coal Capacity Over 12 million tons of current
metallurgical coal production capacity 2.5 million tons of capacity comes back on
line with new Bandmill plant
Development of Rowland property to beginin 2010
Low vol metallurgical coal
Approximately 2 million tons of annualproduction capacity
Produced coal to be available for 2011 exportseason
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
29/35
29
- Positioned to Win -
2008 Operational Expansion Opened 19 new mines
Added 10 new sections inexisting mines
Several new spreads ofsurface mine equipment
New Inman resourcegroup
Re-opened Martin Countyand Coalgood resourcegroups
Capacity will be available
for immediate productionwhen the market rebounds
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
30/35
30
- Positioned to Win -
Cost AdvantagesHigh quality reserves
Economies of scale
Highly productive processing plants
Transportation advantages
Belt lines reduce trucking
Diverse transport options
Efficient, well maintained equipment
S1+P2+M3
Membership
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
31/35
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
32/35
32
Company Guidance*
(In millions exceptper ton amounts)
2009 2010 2011Shipped Tons 37.5 to 38.5 37.0 to 41.0 37.0 to 44.0
Average Price Per
Ton
$63.00 to
$63.50
$64.00 to
$67.00
$64.00 to
$71.50.00
Cash Cost/Ton $50.50 to$51.00
$48.00 to$51.00
$46.00 to$52.00
CAPEX (Approx.) $275 $100 to $200** $150 to $225
Other Income $80 to $100 $50 to $100 $20 to $100
* As of October 28, 2009** Excludes cost of rebuilding the Bandmill preparation plant
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
33/35
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
34/35
-
8/14/2019 MEE Massey Energy Dec 2009 Presentation
35/35
Massey Energy CompanyDoing the Right Thing
with Energy