Peabody Energy Corporation

Welcome to the Peabody second quarter earnings call. All participants will be in a listen only mode. And should you need any assistance during the call, 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, please press star then one on your telephone keypad. To remove a question, please press star then two. Please also note that this event is being recorded. And at this time, I would now like to turn the conference over to Carla Kimrey, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining Peabody's earnings call for the second quarter of 2023. With me today are President and CEO Jim Grech, CFO Mark Sperbeck, and our Chief Marketing Officer Malcolm Roberts. 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 SEC. I'll now turn the call over to Jim.

Thanks, Carla, and good morning, everyone. In the second quarter of 2023, our unique diversified portfolio allowed us to successfully execute against our plan while operating in a volatile market environment. In the quarter, we initiated our annual shareholder return program with a fixed dividend and a meaningful share buyback plan. We returned $262 million through our shareholder return program in the last quarter. Before I address the markets, I want to thank our global employees for their continued focus on working safely and efficiently. Now turning to the global coal markets. Seaborne thermal coal markets remain volatile with prices declining during the second quarter. Comparatively high coal and natural gas inventories in the northern hemisphere following an unseasonably warm winter, have weighed on demand, leading to a weaker pricing environment for high-energy thermal coals. China's year-to-date thermal coal imports point to significant increases in consumption of seaborne thermal coal, with an annual thermal coal import run rate of approximately 400 million tons per year, representing approximately a 90% increase over 2022 levels. India, too, has shown signs of improved economic activity during the first half of 2023, and with it, increased power demand, and elevated coal imports. Overall, demand for seaborne thermal coal is robust and supply remains constrained across major supply regions. We anticipate that the onset of peak summer energy demand in the northern hemisphere followed by restocking and preparation for winter will contribute to a normalization of inventory levels, providing support to seaborne thermal coal markets. Within the seaborne metallurgical market, Global crude steel output during the quarter was variable with interruptions at European blast furnaces, offset by notable year-on-year crude steel production growth in both China and India. Metallurgical coal supply has remained constrained primarily due to residual impacts of wet weather events in Queensland during the first quarter of 2023. The rate of exports from Queensland remains below historical rates. and premium hard coking coal pricing remains elevated, finishing the quarter at $233 a ton. The outlook for the metallurgical coal market remains positive, with subdued seaborne supply combined with anticipated increases in import demand for steelmaking raw materials, along with improving crude steel production rates in Europe, North Asia, and India. In the United States, overall electricity demand decreased nearly 4% year-over-year, negatively impacted by weather. Through the six months and to June 30th, 2023, electricity generation from thermal coal has declined year over year due to low gas prices and nearly level renewable generation. Coal inventories have increased approximately 50% during the six months and to June 30th, 2023. Natural gas prices have recovered modestly from the lows of earlier this year with U.S. natural gas prompt pricing at $2.65 per MMBTU. The EIA is currently forecasting U.S. natural gas prices to average $2.80 per MMBTU in the second half of 2023, up from the $2.40 per MMBTU in the first half of the year. Overall, near-term demand for U.S. thermal coal is anticipated to improve in the third quarter in comparison to the second quarter. Now, moving on to our operating segments. As expected, our seaborne thermal coal exports came in at 2.6 million tons. Higher than the prior quarter as the Wambo Longwall move was completed and wet weather, which impacted the first quarter, was abated. Segment costs per ton were in line with the first quarter as higher production was offset by the timing of equipment repair and maintenance costs. Our seaborne met coal shipments were stronger than expected at 2 million tons due to strong sails out of the CMJV complex. In the second quarter, we had good success with our operations at Shoal Creek as we recovered from the first quarter fire. During the second quarter, we were able to seal off the two longwall panels in the J panel area of the mine. We resumed with development coal production in the new L panel area where we anticipate better mining conditions. A new longwall kit for the mine is expected to be delivered by the end of the year. In the PRB, shipments were lower than anticipated. Shipments were impacted by low customer demand due to low natural gas pricing, high coal inventory levels, and the June tornado event at Narm. In addition, the basin had an abnormal amount of rainfall, which caused a slowdown at some of our operations. The second quarter is typically the wettest in the basin, which also impacts the transportation corridors. In other U.S. thermal, shipments were impacted by lower customer demand as a result of low natural gas prices and high utility inventories. Looking solely at our sole position, PRB volume should increase in the second half, but consumption of PRB coal has been down given low natural gas prices and generally unfavorable weather conditions in the first half. We are working with our customers to be responsive to their needs while retaining the value in our contracts. Our adjusted guidance reflects our current assessment of sales going forward, taking into account the current U.S. market conditions. In addition to our active operations, the company continues to advance redevelopment efforts at North Ginella with key project milestones and critical path items on track. Activities to date have included procuring equipment, refurbishment and replacement of surface infrastructure, Zone A remediation, completion of drilling program for Zone B reventilation, and advancing work necessary to reenter Zone B. The next significant milestone, reventilation and reentry of Zone B, is currently targeted for mid-September, subject to regulatory approval. Since commencing redevelopment at North Ginella in late 2022, The company has invested $53 million of the initial approved redevelopment capital expenditures, which includes further ventilation, equipment, conveyors, and infrastructure updates in anticipation of reaching development coal production, subject to regulatory approvals, in the first quarter of 2024. Before I turn it over to Mark, I would like to address a tornado event that impacted NARM. On June 23rd, our North Antelope Rochelle mine in the PRB was struck by an EF2 tornado. Six people did have to temporarily go to the hospital, but fortunately, no one was critically injured. While we were back to full shipments, we did have considerable damage to the surface buildings. We appreciate all our employees' efforts in returning the mine to full operations. I'll now turn it over to Mark to cover the financial details. Thanks, Jim.