Peabody Energy Corporation

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Peabody Energy Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. If you should require assistance during the call, please press star, then zero. This conference is being recorded. I'd now like to turn the conference over to your host, Julie Gates. Please go ahead, ma'am.

Good morning, and thanks for joining Peabody's earnings call for the fourth quarter of 2020. With me today are President and CEO Glenn Kellogg and CFO Mark Spurback. Within the earnings release, you'll find our statement on forward-looking information, as well as a reconciliation of non-GAAP measures. We encourage you to consider the risk factors referenced there, along with our public filings with the SEC. I'll now turn the call over to Glenn.

Thanks Julie, and good morning everyone. As you all know, 2020 brought immense challenges here in the US and across the globe. For the coal industry, and Peabody in particular, it was no different. As the COVID pandemic came in full force in early 2020, so did lower natural gas prices, lower global energy prices, and the disruption of certain markets throughout most of the year. These unrelated impacts contributed to significant financial headwinds for the industry and for Peabody. Operational results were severely impacted by dual threats of both depressed demand and pricing levels. Security markets requested significant additional collateral in the third quarter and we were at risk of breaching a key financial covenant based on fourth quarter results. Against this challenging backdrop, we engaged in negotiations with our surety bond providers, a group of 22 note holders, and our revolving credit lenders. As Mark will talk about in more detail here in a moment, we were successful in reaching an agreement that we closed on just last week. We accomplished our key objectives of extending a substantial portion of our debt maturities obtaining financial covenant relief, and securing a deal with Assurities. We were not just busy on the financing front either. We had stated that we would continue to mine only when it was safe and economic to do so. Over the course of 2020, we temporarily idled nine individual mines spanning from one week to multiple months. We adjusted ship schedules reduced the number of production units in operation, and further streamlined corporate and support functions. These actions, unfortunately, led us to reduce our global headcount by approximately 2,000 employees. Early on in 2020, when we announced our cost repositioning program, we intentionally did not set a public target as we thought our results should speak for themselves. In that regard, I think they have. Three out of four of our operating segments reduced cost per tonne compared to the prior year, despite a significant reduction in volumes. We reduced total SG&A costs by $46 million. That's not to say we don't have more to do, but it is a credit to the hard work of the Peabody team coming together in these unique and challenging circumstances to achieve those results. Despite the challenges surrounding us, These operations rightly kept safety at the forefront. In the broader context that the U.S. coal industry had the safest year on record, according to MSHRA, we had a consecutive year with no fatal accidents at any of our operated mines. Four U.S. thermal mines had zero reportable incidents, demonstrating truly zero harm, and Australia had its lowest incidence rate since 2017. In addition, our team has always taken great pride in our land restoration legacy, and this year was no different. Globally, we reclaimed nearly one acre of land for every acre disturbed. Over the past five years, Peabody has restored more than 1.3 acres of mined land for every acre disturbed. Our progress is also evidenced in the US through the final phase three bond release of more than 20,000 acres across 10 mine sites in the United States. As we embark on 2021, we are seeing signs of improvement in seaborne thermal coal demand. Global seaborne thermal supply has also been significantly impacted, largely due to severe weather in Indonesia and COVID-related production disruptions in China and labour issues in Colombia. Should demand continue to improve, we are well positioned to capture value. Over the past five years, our seaborne thermal segment has delivered average cost per tonne of $31, making that segment competitive in nearly any pricing environment. While seaborne met markets are also showing encouraging signs of improvement from lows seen in 2020, trade flows remain disrupted, causing short-term pricing volatility. China's limits on Australian coal imports, as well as the scope and scale of a steel market recovery in traditional markets, continue to impact the seaborne met market. Given this backdrop, we remain cautious as we consider bringing on any additional supply, including resuming production at our currently suspended mines. U.S. thermal coal markets continue to be heavily influenced by natural gas prices renewable generation, and weather. This is especially evident in what happened in 2020. For most of the year, prompt natural gas prices were below $2.50, and coal demand suffered. In December, prompt gas prices averaged $2.58, and as a result, we estimate that coal demand rose to nearly a quarter of the generation mix. Currently, the 2021 forward strip Gas price is above $2.50. That said, there is no question that US thermal coal is a challenged market and one that is in secular decline. However, I stand by our US thermal assets. We have the lowest cost assets in the most competitive basin and have demonstrated meaningful cost improvements year over year within our other US thermal segment. Against that backdrop, I'll now go into a bit more detail around what is happening at some of our operations and what we have accomplished over the past year. As I mentioned previously, last year we undertook numerous initiatives to reduce cash spend as we idled mines, adjusted the chip schedules and reduced the number of production units in operation. Across our US thermal operations, we temporarily idled four mines for less than a month at a time to better match our production with customer demand. we have the ability to and continue to shift contracts among mines to best serve our customers' needs and maximise value. Within the Seabourn thermal segment, we temporarily suspended Wambaugh Underground in mid-2020, given tough market conditions. The team has done a great job of improving on development rates, and I'm pleased to note we'll now be moving ahead with the mining of the next panel in the current district in 2022. We also idle all four of our met mines at some point in 2020. Shell Creek and Metropolitan are both still suspended and we are cautiously evaluating market conditions as well as continuing conversations with key stakeholders to best meet their needs and enable those mines to resume production. In 2021, we are planning on further advancing the Moorvale South project. This is a relatively low capex project that will transition Moorvale to a greater mix of semi-hard coke and coal and extend the life of the mine. We're also still progressing the North Canela commercial process. While it's taken a bit longer than we would like, given COVID-related challenges and market conditions, we continue to believe North Canela is a valuable asset with world-class infrastructure and high-quality coke and coal. I'll now turn the call over to Mark to provide some additional colour on the financing process and results.