Peabody Energy Corporation

Good day and welcome to the Peabody first quarter earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Carla Kinray, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining Peabody's earnings call for the first quarter of 2023. With me today are President and CEO Jim Grech and CFO Mark Sperbeck. Within the earnings release, you'll find our statement on forward-looking information and as well as the reconciliation of non-GAAP financial measures. We encourage you to consider the risk factors referenced there, along with our public filings with the SEC. Now I'll turn the call over to Jim.

Thanks, Carla, and good morning, everyone. In the first quarter of 2023, Peabody's diverse portfolio produced another strong quarter of financial results. For the past 18 months, we have aggressively been deleveraging our balance sheet and we remain committed to a disciplined approach for capital allocation. In April, we announced a shareholder return program that will consist of a fixed dividend component, share repurchases, and variable dividends. We are starting a program with a heavy weighting towards share repurchases and expect to transition to a plan including share repurchases, variable dividends, and fixed dividends. Before I expand on the markets and operations, I would like to thank our global employees for their continued focus on working safely and efficiently. Without the dedication of our talented workforce, we would not be in the strong financial position we are in today. Now turning to global coal markets. Global thermal coal prices stabilized in March and recently showed improvement amid supply disruptions in Colombia, South Africa, and ongoing strong demand from India, China, and ASEAN countries. although shoulder, season conditions, and healthy fuel stocks are influencing demand elsewhere. China has ended its unofficial ban of Australian coal imports, providing additional demand for Australian thermal coal, which has resulted in Australian import rates of over 4 million tons per month. Domestic coal production and renewable generation have been strong to start the year. However, import demand has been higher year over year, as overall coal demand has been strong. While it is early in the year, the first quarter of 2023 run rate of imports is close to an all-time high of approximately 400 million tons. India, too, has shown signs of improved economic activity early in 2023, resulting in increased power demand and elevated coal imports, despite elevated domestic production. Overall, demand for seaborne thermal coal is robust, and supply remains constrained across the globe. However, we acknowledge that lower LNG prices and high coal inventory levels in Europe are short-term headwinds in terms of pricing across the globe. Within the seaborne metallurgical coal market, the quarter was characterized by ongoing volatility as global macroeconomic turbulence counteracted improving demand and further weather-induced supply disruptions in Australia. Met coal price volatility continued, and early March increases eroded in the second half of the month amid macroeconomic sentiment, to the lowest level since mid-January, albeit remaining healthy at around $250 per metric ton for headline hard coking coal. In the United States this quarter, natural gas prices have weakened further due to near-record gas production levels. U.S. natural gas prompt prices are approximately $2.25 per MMBTU. The EIA is currently forecasting Henry Hub natural gas spot prices to increase above $3 per MMBTU during the second half of 2023 in response to higher feed-in volumes to LNG exports while natural gas production rates remain flat. Overall, near-term demand for U.S. thermal coal is expected to be muted as a result of low gas prices and stronger renewable generation. However, as summer weather brings stronger total load demand and increased LNG export pressure gas prices, coal demand has the potential to increase in the second half of 2023. Now, moving on to our operating segments. Our seaborne thermal segment's first quarter exports were stronger than anticipated due to better than expected production out of Wolpenjohn as a result of more efficient mine sequencing and Wamba open cut as a result of improved productivity. Cashed cost per tons were lower than anticipated due to the increased coal production as well as lower overall spend. Our Seabourn MET production was down from the fourth quarter due to lower volumes at Shoal Creek and rail and transport congestion on Australia due to heavy rains earlier in the year. On March 29th, 2023, the Shoal Creek mine experienced in the J2 longwall panel A fire involving void-filled material utilized to stabilize the roof structure of the mine. All mine personnel were safely evacuated from the mine. MSHA has allowed mine rescue-equipped personnel into the mine at various times to assess the situation and perform work in preparation for installing temporary seals. On April 26, MSHA approved a temporary sealing program limited to only the affected underground area. which consists of the J2 panel and previously mined J1 panel. At North Gunyella, we continue to advance redevelopment efforts and expect to spend approximately $120 million as planned in 2023. As a reminder, North Gunyella is a premium grade hard coking coal long well operation in Queensland, Australia, with over 70 million tons of reserves. This operation's grade of coking coal is considered to be the cornerstone of coking coal feedstocks globally. North Guinea is expected to meaningfully increase Peabody's metallurgical coal production and generate approximately 25% returns at historical long-term prices in this initial phase. In the U.S., PRB sales volumes recovered due to higher customer nominations and better rail performance. We are able to pull forward some maintenance into the first quarter to improve truck availability and lower costs for the remainder of 2023. Our other US thermal mines continue to perform well as expected. We are still essentially fully committed at our US domestic operations for 2023, and the railroads are showing improvement in their service levels. While we are sold out, we are working with our customers to be responsive to their needs while retaining the value in our contracts. Our guidance reflects our current assessment of sales going forward, taking into account the current US market conditions. I'll now turn it over to Mark to cover the financial details. Thanks, Jim.