Peabody Energy Corporation

Good morning, ladies and gentlemen, and welcome to the Peabody Q4 2021 Earnings 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, February 10, 2022. I would now like to turn the conference over to Alice Aranos, Vice President of Investor Relations and Communications. Please go ahead, ma'am.

Thank you. Good morning. Thanks for joining CBI's earnings call for the fourth quarter of 2021. With me today are President and CEO Jim Grack and CFO Mark Spurback. Within the earnings release, you'll find our statement of 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 filing here at the FDC. With that, I'll now turn the call over to Jim.

Thanks, Alice, and good morning, everyone. KeyBuddy recorded robust fourth quarter results, demonstrating the capability of our diverse portfolio of mines, which continues to benefit from strong global market fundamentals driven by the vital necessity for coal to produce reliable, affordable energy and steel to fuel the global economy. Overall, our operations performed well and were in line with our expectations, delivering volumes and results despite industry-wide challenges that were more substantial than we anticipated related to weather and COVID impacts. With strong market dynamics and significant forward sales commitments, we restarted long-haul production at our Shoal Creek mine, advanced development of Morvale South, and are positioning for increased production at our U.S. thermal segments to meet near-term demand for our product. Our focus remains to advance options to position the company to be resilient in all market cycles by capturing expanded margins through production and sales strategies while remaining long-term cost competitive and reducing our debt levels. I would like to thank our global employees for their continued focus on working safely and efficiently, particularly in light of meeting the challenges presented by the pandemic. In 2021, our recordable injury rate was the lowest in over a decade an example of the dedication and efforts of our talented workforce. And for the second year in a row, our rawhide and 20-mile operations had zero reportable incidents during the year. I'd also like to take the opportunity to compliment the workforces at Shoal Creek and Metropolitan for their efforts and performance during the long-haul restarts at these locations. Across the globe, all coal price indices and demand in each of our market segments continues to be strong. The near-term outlook for all our operating segments continues to be favorable with strong market indicators and increased global demand providing a persuasive story for coal and Peabody. Seaborne thermal and metallurgical coal markets are expected to remain robust in the near to medium term as supply challenges coincide with a period of elevated demand. Indonesia's January coal export ban, record rainfall in late 2021 across the east coast of Australia, COVID impacts across the globe, and Russian transportation congestion are all factors contributing to constrained supply for seaborne thermal coal. Additional demand factors included increased industrial production resulting in growing demand for coal-fired electricity generation, high LNG prices resulting in low switching, and peak winter demand in the Northern Hemisphere. These supply and demand factors are combining to create an increased price environment for seaborne thermal coal. The seaborne metallurgical coal market has experienced similar supply constraints as the seaborne thermal market. Demand is benefiting from high global steel output outside of China, incentivized by strong steel product margins. Key import market consumption is now above pre-pandemic levels. In the U.S., thermal coal market indicators continue to be favorable with increased electricity demand and higher natural gas prices compared to prior year. For 2021, electricity demand increased 3% over last year, with coal share of electricity generation increasing to approximately 22%. Total U.S. coal burn was up approximately 15%, while utility consumption of PRV coal increased approximately 22% compared to the prior year. Looking ahead, total electricity generation for 2022 is expected to grow by another 1% as the economy continues to recover from COVID impact. U.S. thermal coal prices remain elevated as supplies remain tight. Continues strong U.S. exports as a result of high seaborne thermal prices along with elevated and volatile natural gas prices reflecting uncertainty of winter weather and gas storage levels are putting pressure on market sentiment. Coal stockpiles in the U.S. have fallen by approximately 35 million tons, more than 25% since the end of 2020. All these dynamics set a compelling stage for 2022 in terms of demand and pricing for our coal products. Now, turning to the fourth quarter, our operations generated substantial cash flows, realizing expanded seaborne margins as a result of continued strong market demand. Our teams delivered on our projected volumes for the quarter, despite production challenges. In addition, We continued efforts to capture near-term returns from incremental 2022 U.S. thermal production with equipment optimizations and new hires. Within our seaborne thermal segment, the Wilton Yarn Extension and Rambo OpenCut JV projects have essentially completed development work with operations reaching full production run rates. Margins continue to expand both due to higher pricing and lower costs. Our seaborne meth segment captured margins of $105 per ton due to robust market prices. I'm happy to share that we successfully restarted longwall operations at Shoal Creek right in the quarter and delivered 70,000 tons of Hival-A product into the market at price levels substantially in line with benchmark prices. We are on track with development of Moorvale South, which will provide improved quality and extended life at our CMJD complex. We anticipate first coal and development completion in mid-2022. PRB sales volumes are negatively affected by winter weather and COVID impacts to production and rail performance. And costs for both our PRB mines and other U.S. thermal mines increase as a result of higher fuel prices and one-time costs associated with efforts to add incremental new-term production to capture market demand. We are being disciplined in adding incremental volumes. capturing short-term returns on investments for our stakeholders, and remaining focused on the long-term cost competitiveness of our operations. Favorable U.S. coal markets have allowed us to build a strong book of forward business with settlement of several long-term sales agreements at improved prices. We continue to explore sales strategies that position us to be the long-term producer of choice, providing our customers long-term supply security. In the PRV at 2021 production levels, we're essentially fully committed for 2022 and 55% committed for 2023, while the other U.S. thermal operations are essentially committed for the next two years at these levels. Outside of our operating segment reporting, our ownership share of Middlemount delivered 2 million tons of semi-hard and PCI met coal in 2021 with 400,000 tons in the fourth quarter. In the quarter, the operation posted EBITDA margins of 58%, benefiting not only from current market dynamics, but also cost and productivity improvement efforts. Our Q4 results are further validation of the value of our globally diversified asset base, which makes us distinctly unique from other coal companies. 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. We are progressing this strategy with multiple initiatives. In our MET platform, we are advancing development of Morville South to improve quality and extend life at our CMJV. At Shoal Creek, we are ramping up longwall production, and at Metropolitan and the CMJV, we are maintaining productivity and cost improvements. And notably, we are looking at the potential to restart North Bonilla, utilizing our existing reserves that we control. At Middlemount, we continue to ramp up production with equipment fleets added last year. At Swamble Underground, we're reviewing economics for development of additional underground panels. In the U.S., we're implementing plans to capture short-term returns on incremental volumes and to give us flexibility in our mine plans to meet customer demands with additional underground production units and development in the ILB, in addition to refurbishing and relocating equipment in the PRV. And across the platform, we are focusing on long-term resiliency by maintaining cost structure improvements that we've achieved, with continued emphasis on productivity and cost controls, and continuing to strengthen the balance sheet with debt and legacy liability reductions. I'll now turn things over to Mark to cover the financials.