Peabody Energy Corporation

Good morning, ladies and gentlemen, and welcome to the Peabody Q3 2021 earnings call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the Q&A 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, October 28, 2021. I would now like to turn the conference over to Alice Theranos, President of Investor Relations and Communications. Please go ahead.

Good morning, and thanks for joining Peabody's earnings for the third quarter of 2021. With me today are President and CEO Jim Grex and CFO Mark Spurback. Within the 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 SEC. I'll now turn the call over to Jim.

Thanks, Alice, and good morning, everyone. Seabuddy had a very good third quarter with our results benefiting from current robust global coal market dynamics. Strong operational performance coupled with increased seaborne pricing and global demand yielded quarterly results we have not seen since 2018. We continue to advance actions to position the company to be resilient in all market cycles by expanding our margins, reducing our debt levels, and removing obstacles to increase production. I would like to start by thanking our global workforce for their continued focus on working safely and efficiently. We are excelling not only because of strong coal markets, but also due to the dedication and efforts of our talented workforce. Across the globe, we are seeing record coal index prices in each market segment and demand returning to near pre-pandemic levels. The near-term market outlook for all our operating segments is favorable with strong market indicators and increased global demand providing a compelling story for coal and Peabody. 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. heavy rains in Indonesia, rail issues in Russia, production issues in Colombia, and hampered domestic supply in China. Additionally, gas supply constraints and low wind generation in Europe have all combined to exert positive pressure on the global thermal market, while the seaborne met market is being bolstered by robust steel production and decade-high steel margins and tight coal availability. For 2022, With 2 million tons of incremental production expected at our met coal mines and thermal export production in line with 2021, we are well positioned and are looking forward to taking advantage of this demand and the margins that we anticipate will come with it. In the U.S. thermal coal market, indicators are also favorable with increased electricity demand and high natural gas prices leading to gas to coal switching and robust growth in coal generation as compared to prior year. Overall, electricity demand increased 3% over last year, with coal's share of electricity generation increasing to approximately 23% for the first nine months of 2021. As a result of increased demand and supply response, coal inventories have fallen by approximately 54 million tons year-to-date, the lowest level since 1997. Natural gas prices at high levels was reported that we have not seen since 2014, driving up coal generation demand. During the first nine months, utility consumption of PRB coal rose approximately 30% compared to prior year. Site supply and demand balances are leading to high forward prices for natural gas. Those forward prices and strong coal export demand are supporting expectations of continued elevated coal prices in the near term. At Peabody's PRB operations, We increased volumes and are trending towards the high end of our guidance range for 2021 and anticipate some incremental volumes next year. We currently have some uncommitted tons for 2022. However, given current demand exceeds supply, we're only selling those uncommitted tons under multi-year contracts. At our other U.S. thermal operations, we are ramping up volumes next year by approximately 2 million tons to meet increased customer demand. though we only have a small portion left to be sold for 2022 and for 2023. Now turning to the quarter, our operations were able to deliver projected volumes, offsetting the impacts of labor shortages and higher fuel costs. In addition, we continue to invest in the future with increased equipment refurbishments and mine development. Within our seaborne thermal segment, The Wilpen-Young Extension and the Wambo Open Cut JV development projects continue to advance, with over $200 million of capital invested over the past three years. I'm happy to report the box cut development work was completed at both projects in the third quarter, and we anticipate the Wambo JV to operate at full production run rates in Q4. Our seaborne thermal margins benefited from price increases of 66% in the quarter compared to the prior year, and the segment is on target to deliver higher export volumes in the fourth quarter as compared to prior quarters in 2021. Our Seabourn Met segment continues to deliver on efforts to expand margins through cost and productivity improvement initiatives, as well as sales strategies. In the quarter, the CMJV Complex and Metropolitan delivered 36% higher volumes at 16% lower cost per ton as compared to the prior year. The CMJV continued to realize productivity improvements at Metropolitan and Metropolitan reached planned longwall production rates. At Metropolitan, we reached a long-term sales agreement that underpins the mine for the next three years with pricing linked to seaborne met coal pricing. And importantly, both Metropolitan and Shoal Creek completed renegotiated labor agreements. The workforce has been back at Shoal Creek since early October. and we expect to restart production later this year. The U.S. thermal mines delivered another solid quarter generating significant EBITDA. Availability of labor impacted production at several of our U.S. mines this quarter, but we see this improving through programs that we have put in place. And finally, robust U.S. coal market dynamics have allowed us to build a strong book of forward business. The settlement of several long-term sales agreements at improved prices as compared to current level. Notably, in addition to multi-year PRV contracts, we have reached agreements that will support the continued operation of our 20-mile mine in Colorado for the next five years and have signed agreements in the Illinois Basin with increased pricing through 2025. Our globally diversified asset base, which makes us distinctly unique from any other U.S. coal company, is allowing us to benefit from these market conditions. Our Q3 results were a confirmation of the value we can generate from our asset mix. During the quarter, we also continued to take actions to reduce our debt levels and raise cash to the issuance of common shares. To date this year, we have reduced our debt levels by approximately $250 million. We also took steps to reduce our closed mine and legacy liabilities through the sale of our Millennium and Wilkie Creek closed mines. These actions are part of our commitment to enhance our platform to be resilient in all market cycles. We are also progressing on multiple initiatives that will allow us to expand and improve near-term production. As previously mentioned, Shoal Creek will be back in production later this quarter, and at Metropolitan, the Longwall is producing at full run rates, resulting in significant year-over-year increases to our seaborne MET export volumes. Moorvale South, which will result in improved quality and extended life at our CMJV, is expected to be in production in the first half of 2022. And in the U.S., we are implementing plans to produce incremental volumes at our mines in the near term, adding underground production units in the Illinois Basin and expanding development at our wild boar complex. In addition, in the PRB, we are refurbishing and relocating equipment to enable increased production. Our long-term strategy remains to reweight investments towards seaborne markets, maximize U.S. thermal asset cash generation, and enhance financial strength through debt reduction. I'll now turn things over to Mark to cover the financials.