Peabody Energy Corporation

Ladies and gentlemen, and welcome to Peabody Energy's second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question and answer session. If anyone needs assistance at any time during the conference, please press the star followed by the zero. As a reminder, this conference is being recorded today, July 29, 2021. I would now like to turn the conference over to Alice Larinas. Please go ahead.

Alice Larinas Thank you. Good morning, and thanks for joining PBIE's earnings call for the second quarter of 2021. With me today are President and CEO Jim Grech 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 financial measures. We encourage you to consider the risk factors referenced there, along with our public filings with the FDC. I'll now turn the call over to Jim.

Thanks, Alice, and good morning, everyone. Peabody had an encouraging quarter as our assets are continuing to deliver solid operational performance, and we're seeing robust global coal market demand with strong economic indicators as economies continue to recover from the pandemic. We are progressing on actions to expand our margins and reduce our debt levels and are well positioned to benefit from market recoveries. Higher volumes for the second half of 2021 are projected at a time of robust markets. But before I cover the highlights for the quarter, I'd like to begin by thanking our global workforce for their continued focus on working safely and efficiently. I've been impressed by the dedication and efforts of our team, and I'm confident we will continue to build on improvements we have achieved today. As planned, in every segment, our assets are expected to deliver increased production in the second half of the year as we benefit from our efforts at a time of elevated demand. Within our Seaborn thermal platform, we expect higher volumes from the advancement of development at the Wombo JV and the Wolpenjong extension projects. Within our U.S. thermal platform, we expect PRB demand to continue at the strong pace we have seen in the second quarter, and we are positioned to deliver all customer volumes. And in the Illinois Basin, we're expecting productivity improvements from our Indiana Open Cup Mines due to new pit development and equipment enhancement projects. And finally, at our Met Mines, we expect higher volumes from the CMJV and from the Metropolitan Longwall reaching planned production. Now turning to the quarter. Second quarter results show EBITDA improvements in every operating segment as compared to prior year as our assets are responding favorably to increased market demand with lower costs as a result of improvement efforts across the company. Our seaborne thermal segment benefited from increased prices compared to the prior year, resulting in margins of 37 percent. I'm happy to say that the Wambo JV development and the Wilpin Jong Extension projects, with over 50 million of capital invested year-to-date, are both on target to deliver higher volumes in the second half as compared to the first half of 2021. Our U.S. thermal mines delivered another solid quarter, generating EBITDA of nearly $90 million. The operations continued to deliver low costs while benefiting from market recovery, with more than a 20% year-over-year increase in volumes. In the quarter, we recognized improvements in our seaborne met segment costs with a 14% versus the prior year, led by productivity improvements at the CMJV. At Metropolitan, long-wall production restarted. We are confident a long-term agreement with our domestic customer will be completed within Q3. And at Shoal Creek, we are on target to complete the prep plant upgrade project in mid-Q3. And we continue productive discussions with the union regarding the expired labor agreement and we continue to review options with customers as we see that there is a robust demand for the Shoal Creek product in the near-term market. We also took steps in the quarter to reduce our debt levels and raise cash through the issuance of common shares. Mark will have more detail on this in his comments. We remain committed to enhancing our platform to be resilient in all market cycles by operating within our optimal cost structures with a focus on cost improvements, and a disciplined approach to volumes. Our intent is to opportunistically reduce our debt levels and bolster our liquidity as we have demonstrated with our year-to-date progress. Looking forward, we continue to evaluate alternatives to strengthen our portfolio to achieve our strategic objectives of reweighting investments towards seaborne markets, maximizing U.S. thermal asset cash generation, and maintaining financial strength. We are exploring opportunities to invest in the growth of our Seabourn platform. In the second half, we expect to begin development of Morvale South, which will transition the mine from a greater mix of PCI production to semi-hard coking coal and extend the life of the mine. Based on current economics, we are also progressing plans to develop Longwall 23 panel to extend the life of Lambeau Underground into 2023. Also, subsequent to the quarter, we closed transactions to sell our closed Millennium and Wilkie Creek mines, which will result in reduced administrative oversight and a reduction of our closed mine liabilities. And as a result, in Q3, we'll recognize somewhere between $40 to $50 million net gain and receive a small cash consideration. From a broader market perspective, the near-term outlook for all of our segments is favorable with strong market indicators and increased global demand. The seaborne thermal and metallurgical coal markets are expected to remain tight in the near to medium term as supply response to elevated demand remains muted. Newcastle thermal coal pricing is at levels not seen in over 10 years. In the U.S., Thermal coal market indicators are favorable with increased electricity demand and high natural gas prices. Overall, electricity demand increased 4% over last year, positively impacted by weather and week prior year comparatives due to COVID. Coal share of electricity generation increased to approximately 22% for the first half of 2021. And as a result, coal inventories have fallen by approximately 17 million tons. During the first six months of this year, utility consumption of PRB coal rose approximately 35% compared to the prior year. These global market conditions are showing the strength of our globally diversified asset base, which makes us distinctly unique from any other U.S. coal company. Our Q2 results are a great example of the value we can generate from our asset mix and then use those funds to reduce our debt levels, while investing in assets that strengthen our production positions in the markets where we get the best value for our product. I'll now turn things over to Mark to cover the financials.