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spk03: Good morning and welcome to the Peabody fourth quarter 2023 earnings conference call. All participants will be in 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 your telephone keypad. 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 Kimrey, Vice President of Investor Relations. Please go ahead.
spk11: Good morning, and thanks for joining Peabody's earnings call for the fourth quarter and full year 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 will 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.
spk07: Thanks, Carla, and good morning, everyone. For the full year 2023, our operations performed as expected, delivering another year of strong results, allowing us to further enhance shareholder value. We pre-funded our long-term mine closure and reclamation obligations and implemented a robust shareholder return plan, which resulted in reducing our shares outstanding by over 11 percent. We also continued to strategically reinvest in our MET portfolio for our Centurion development project, the pending acquisition of a large portion of the Ward's Well Reserve adjacent to the project, and the purchase of the new lawn wall kits at our Shoal Creek and Metropolitan operations. In the fourth quarter of 2023, we produced strong results despite a non-Peabody-related train derailment on the main line in Australia that interrupted some deliveries in December. We continued to advance development of our Centurion Premium hard coking coal project and successfully put the new long wall at Chill Creek into production ahead of schedule. Given the March mine fire at Chill Creek, this was an incredible achievement that would not have been possible without the efforts of our dedicated employees working in close coordination with MSHA. Before I expand on the markets, I want to thank our global employees for their continued focus and commitment to working safely and efficiently. Coming off our lowest annual global injury rate in company history last year, this year we achieved our second best annual global injury rate and a record low injury rate in Australia for a calendar year. Our Wolpenjohn mine celebrated two years with no lost time incidents. Our 20-mile mine won the Sentinels of Safety Award for the second year in a row. recognizing the mine as the safest underground mine in the U.S. Now, turning to the global coal markets. Seaborne thermal coal markets were range-bound during the quarter. Elevated coal and natural gas inventories in the Northern Hemisphere have continued to weigh on demand for high-energy thermal coal, coupled with an increased supply from the east coast of Australia, resulting in Newcastle coal trading within a range of $120 to $150 a tonne. Asian thermal coal imports continue to grow, with China reporting that thermal coal imports totaled 354 million metric tons for 2023, increasing by 62% compared with the year-ago level, and were by far the largest contributor to Asian import growth. In contrast, Japan and Korea are on track to record mild decreases in imports for 2023. Within the seaborne metallurgical coal market, the volatility which characterized the first nine months of 2023 continued during the balance of the year. The steel sector outside of China showed growth in crude steel output during the three months ended December 31, 2023, led mainly by India and its ongoing strong economic expansion. Total crude steel output during the period, however, contracted because of a sharp decline in Chinese production where steel producers reported thin margins and slower domestic demand. Premium hard coking coal indices finished a quarter marginally lower, around $323 a ton. The outlook for the metallurgical coal market remains positive, with seaborne supply remaining below historical levels, combining with strong Indian purchase interest and new import demand for steelmaking coals within Southeast Asia. In comparison, PCI and semi-soft coking coals observed more substantial price reductions. In the United States, electricity generation from thermal coal has declined year-on-year due to low gas prices and the impacts of renewable generation. The near-term demand outlook is anticipated to be challenged by comparatively high generator inventories as we transition into the post-winter shoulder season. Renewables continue to grow as part of the energy mix. We have seen several of our customers delay the retirement of some of their plants in order to ensure grid reliability. Now moving on to our operating segments. Our seaborne thermal fourth quarter coal volumes came in at 3.7 million tons, which was lower than anticipated primarily due to a train derailment on the main line which serves our Wilpin Yonge mine. The derailment occurred on December 6 and impacted shipments for 10 days. Segment costs per ton were at the high end of our range due to the lower shipments. Our seaborne MET segment shipments were 2.1 million tons in the quarter in line with expectations, while total segment costs were better than anticipated at $108 per ton. In December, we were able to successfully commence new longwall production at Shoal Creek in the newly developed L panel district ahead of schedule. And the PRB shipments of 23.6 million tons were better than anticipated, This quarter, Peabody increased our production share of the total PRB shipments from 39% in the third quarter to 43% in the fourth quarter. Another U.S. thermal shipments were 3.7 million tons, slightly below expectations as we had a few customers reduce their demand due to high inventories and natural gas pricing. Outside of our active operations, we continue to make progress at the Centurion Mine, our key metallurgical coal growth project. In December, we renamed North Gunyella as a Centurion mine, signifying a new chapter in our operations. The Centurion complex will include the former North Gunyella mine along with the new Ward's Well deposit, which is adjacent to our existing property. We anticipate closing on the Ward's Well transaction in the second quarter. At site, we continue to advance on initiatives to support the commencement of development coal in April. including installation of a new conveyor system and the commissioning of equipment for underground development. We're also making progress with building out the workforce as we welcomed our first group of permanent underground workers. We'll continue to onboard additional underground operators and maintenance staff to support scaling up of development. We continue to expect our first sales of development coal in the second half of 2024 and longwall coal in 2026. We enter the new year with a diverse platform that gives us the stability and consistency to deliver results, allowing us to return cash to shareholders and advance major projects as we weight our portfolio to more seaborne coal. As we look forward to 2024, we are focused on executing our strategy by continuing to deliver consistent, predictable, and reliable performance from our operations, advancing Centurion, our Tier 1 premium hard coking coal development project, and delivering value to our shareholders through our previously announced shareholder return program. I'll now turn it over to Mark to cover the financial details. Thanks, Jim.
spk08: In the fourth quarter, we recorded net income attributed to common stockholders of $192 million, or $1.33 per diluted share, and adjusted EBIT of $345 million. For the full year, we recorded net income of $760 million, or $5 per diluted share. an adjusted EBITDA of $1.4 billion. The company generated $1.1 billion of operating cash flow from continuing operations and $724 million of available free cash flow. Based on these results, we have announced the return of $471 million to shareholders, primarily through share buybacks. Through December 31st, we have repurchased 16.1 million shares, better than 11% of shares outstanding, and have $80 million more to deploy in the first quarter. Turning now to segment results. In the fourth quarter, Seabourn Thermal reported 100 million of adjusted EBITDA. Tons shipped were less than anticipated primarily due to a rail issue on the mainline, which limited Wilpin Young shipments and moved costs toward the higher end of guidance. For the full year, the Seabourn Thermal segment reported 577 million of adjusted EBITDA. Export shipments increased to 10 million tons, and the segment achieved adjusted EBITDA margins of 43%. The Seabourn Metallurgical Segment generated $166 million of adjusted EBITDA in the fourth quarter, more than double the prior quarter's result as both shipments and realized prices were substantially higher. Costs of $108 per ton were below the low end of guidance as Shoal Creek achieved a great, earlier-than-expected start of a new longwall in the L Panel District. For the full year, the Seabourn Metallurgical Segment reported $438 million of adjusted EBITDA. Shipments increased to 6.9 million tons despite a tough transition year at Shoal Creek. The segment achieved adjusted EBITDA margins of 34%, a favorable result considering our average realized price was $55 per ton lower than last year as a result of weaker PCI coal prices. The PRB mines shipped 23.6 million tons, our highest quarterly volume since 2019. a testament to our team's full recovery from the mid-year tornado disruption, putting themselves in a position to seize an opportunity to load additional trains. Higher shipments were partially offset by additional repairs and other costs, resulting in $38 million of adjusted EBITDA for the quarter. For the full year, adjusted EBITDA was $154 million, more than double last year. As we continue to benefit from the sales book we built during 2021 and 2022, where we favored longer-term contracts with improved pricing over shorter-term contracts at spot pricing levels. Year over year, our PRB average realized price increased 85 cents per ton, or nearly 7%, and over the last two years, our PRB average realized price is up 25%. The other U.S. thermal mines delivered 42 million of adjusted EBITDA in the fourth quarter, Production was impacted by the planned long-wall move at 20-mile and lower volumes from certain customers reduced shipments below guidance. However, we benefited from a substantial increase in the average realized price to $57 per ton due to buyouts and compensation payments from these customers. As a result, segment EBITDA exceeded implied guidance. For the full year, adjusted EBITDA was $208 million, and we achieved segment-adjusted EBITDA margins of 23%. Together, the U.S. thermal mines produced 361 million of adjusted EBITDA in 2023, an increase of 51 million over the previous year. Looking ahead to 2024, we expect another year of consistent operating and financial results. Seabourn thermal volumes are expected to be very similar to 2023, However, we anticipate benefiting from a higher proportion of Newcastle's spec product due to mine sequencing at the Wambo open-cut mine. Shipments are anticipated to be 15 to 16 million tons, including 10 million export tons, and costs are projected to be consistent with 2023 levels at $45 to $50 per ton. Seaborne metallurgical volumes are projected to increase by 1 million tons to 8 million. primarily due to a full year of production from the newly installed longwall at Shoal Creek. Segment costs are expected to improve to $110 to $120 per ton. In the PRV, we are forecasting shipments of 80 to 87 million tons, and we have 85 million tons priced at $1,370. Costs are expected to remain mostly flat with 2023 levels at $1,175 to $12.5 per ton. Other U.S. thermal volume is expected to be 15 million tons, down slightly from 2023 as we transition from the El Segundo to Lee Ranch Reserves out west. We have 15.2 million tons priced at $53.70 and expect costs in the range of $41 to $45 per ton, largely consistent with last year. Total capital expenditures are estimated at $375 million, including $235 million of project capital. primarily for the continued development of Centurion and sustaining capital of $140 million. Additionally, we expect to close the previously announced acquisition of the Ward's Well Coal Deposit. Specifically for the first quarter, Seabourn thermal volumes are expected to be 3.9 million tons, including 2.5 million export tons, as we ramp up from the Wambo Underground Longwall move from the fourth quarter of last year. Costs per ton are expected to be consistent with prior quarter at $48 to $53 per ton. Seabourn metallurgical volumes are expected to be lower than rateable at 1.4 million tons, with costs temporarily elevated at $130 to $140 per ton, primarily due to a long-wall movement metropolitan and mine sequencing at the CMJV. We also continue to monitor the Demopolis lock situation, a lock under repair that has the potential to temporarily increase transportation costs at Shoal Creek, but we don't anticipate a financial impact to first quarter results. We expect to ship 21 million tons of PRB coal in the quarter, with costs largely consistent with the prior quarter at $11.75 to $12.50 per ton. Other U.S. thermal coal shipments are expected to be in line with the prior quarter at 3.6 million tons, while costs improve to $41 to $45 per ton. In summary, Peabody delivered another year of consistently strong results and generated substantial EBITDA and, most importantly, free cash flow. Peabody's diversified portfolio of mines is uniquely positioned, having generated approximately 40% of adjusted EBITDA from the seaborne metallurgical segment, 40% from the seaborne thermal segment, and 20% from the U.S. thermal segments over the last two years. After repaying the last of our secure debt in 2022, last year we pre-funded all future mine closure and reclamation obligations, further enhancing the company's financial strength and flexibility. With our financial and environmental liabilities addressed, we reinstated a robust shareholder return program and announced the return of $471 million to our shareholders based on 2023 results. Last month, we announced a new $320 million revolving credit facility, further enhancing the company's financial resiliency during the development period at Centurion. We anticipate achieving our goal of further weighting Peabody's long-term cash flow towards premium hard coking coal when longwall production begins in 2026. We remain focused on creating shareholder value, operating safe and efficient mines, maximizing free cash flow and shareholder returns, and continuing development of Centurion, all while maintaining our financial strength.
spk10: Operator, I'd now like to turn the call over for questions.
spk02: We will now begin the question and answer session.
spk03: To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble the roster. And our first question comes from Lucas Pipes of B. Reilly Securities. Please go ahead.
spk05: Thank you very much, operator. Good morning, everyone. Good morning, Lucas. My first question is on the METCOL guidance for 2024. Nice outlook there. And twofold question. First, would you be able to provide a breakdown of the quality of METCOL at the midpoint, call it 8 million tons, and then how many development tons from Centurion would be included in that guide? Thank you very much.
spk08: Hi, Lucas. Good morning. Yeah, we're real pleased with the 8 million tons for the full year 2024, really stepping up a million tons and really based on good production from Shoal Creek. As you're aware, we have a little bit of development coal that we expect out of Centurion. While we'll be getting that coal and building inventories, probably sales will be light, closer to, you know, 150,000 tons today. When we look at the total over the portfolio, we're probably looking at about 4 million tons of PCI and about a million and a half high-volume product, primarily from Shoal Creek.
spk05: Thank you. The balance, maybe I didn't catch it all. Yeah, the rest of that is metropolitan.
spk08: Got it. Which is kind of a semi-hardcooking goal.
spk10: What would be the best index for Metropolit?
spk08: I mean, we continue to look at the whole portfolio and achieving that off of a premium hard-coking cold of 65% to 70%. But Malcolm, maybe you want to address the relativities of those products.
spk06: Yeah, look, we don't list independently each of our assumed relativities, but Metrop is clearly priced against prime low-volt hard-coking cold. as moldy as can to that.
spk05: Very helpful. I appreciate that. Thank you. Then, kind of staying on the Metco side, for Centurion, could you remind us of the CapEx budget, the total CapEx budget? Has that evolved? Is that under review? And kind of looking out to 2025 and beyond, what would be left in terms of capital expenditures at the end of this year? Thank you very much.
spk08: Yeah, Lucas, I'll break that down. So as we previously announced, the North Ginella historical legacy portion of Centurion, that's a total capex of $489 million. $125 million of that has been spent as of 12-31. We have in the budget $150 million for 2024, and that would leave about $200 million for 2025 for the North Ginella side. Now, the Ward's Well piece, we look to close that here in the second quarter of this year. We do have $50 million of capital development for the Ward's Well portion of Centurion in 2024. We haven't come up with a full project CapEx beyond that. We're still in the process of developing an integrated mine plan, and we'll provide that guidance at a later date.
spk07: And, Lucas, I'd like to add to that that CapEx... The portions of it that are associated with equipment and conveyors and so on and miners has pretty much been ordered, and those costs are known. You know, a large part of what Mark's talking about is the development costs, which get capitalized until we get into production. So, you know, as far as equipment and being exposed to inflationary pressures, we feel that's pretty much behind us. And we feel pretty good about those capital numbers because, again, it's mainly associated with development going forward.
spk05: Very helpful. Thank you for that. I'll squeeze one last theme, and it's around your balance sheet and capital returns. So kind of a three-pronged question. I'll try to be brief. Congratulations on the revolver. How does that fit into kind of your capital structure going forward? Does that unlock additional capital return opportunities? And related, how do you think about kind of cash on your balance sheet today? Is that the right level going forward? Again, it kind of ties into the revolver, of course. And then how should we think about net interest income or expense? given that cash balance. Would appreciate your thoughts on this.
spk08: Thank you. Yeah, all right. So you stuck kind of three questions in there in the last one, Lucas. Happy to answer those questions, though. And I'll start and just remind that, you know, everything we've done from a balance sheet perspective over the last two years has addressed the evolving capital markets for our industry, which operates with above-average volatility in both demand and market pricing. we will not risk the company's financial strength, and we took an opportunity to solidify our financial resiliency for the inevitable dips in the market with this new revolving credit facility. We think that was particularly prudent during the development phase of Centurion, our premium seaboard medical coal growth engine. The revolving credit facility does provide an attractive opportunity to utilize it for letters of credit, for surety, and other commercial requirements, something that we would be particularly comfortable doing at a Tier 1 met coal mine with a 20-plus year life. I will add that Moody's did take note, bumped our rating up a notch, and while this financial strength comes at a cost of additional liquidity, we continue to benefit from lower surety bonding fees, lower FX hedging costs, as well as lower D&O premiums. So there is a net benefit there in addition to the interest income that you mentioned we get a safe treasury-like yield. So at today's market, it's probably 4.5% to 5% is a good marker to use on those MS cash balances.
spk05: Got it. Okay, that's helpful. I'll leave it here for now. Appreciate it, and best of luck.
spk03: Thanks, Lucas.
spk05: Thank you, Lucas.
spk03: Next question, please. The next question comes from Katya Jacinic of BMO Capital Markets. Please go ahead. Hi, thank you for taking my questions. George, just to confirm, you expect Shoal Creek to add 1.5 million tons this year?
spk08: Yeah, we haven't provided guides on the individual mine level, but that's in the right ballpark. We had a really good start to the quarter. We probably think production is probably in that ballpark.
spk03: And can you just remind us what is the production capacity at Shoal Creek at this point? the max?
spk08: That mine has done more than one and a half historically, but given where we're at in the mine geological conditions, we're comfortable with those levels.
spk03: Okay. And then just quickly, the major project Apex is at $235 million, and I think you mentioned the Centurion is about $150 million. Can you talk a bit about what the rest? What are some of the other projects included in that?
spk08: Yeah, there's $150 million for the North Canela portion of Centurion. There's about $50 million for the Wards Well portion of that, assuming we get that closed in the second quarter. There's also probably $15-20 million down at the Wombo Open Cut Joint Venture that's run by Glencore.
spk02: Okay, thank you very much.
spk10: Thank you.
spk02: I think we can take the next question.
spk03: Oh, I'm sorry, Katja, did you have more? The next question comes from Nathan Martin of Benchmark. Please go ahead.
spk00: Thanks, operator. Good morning, everyone. Thanks for taking my questions. We'll start on the seaborne thermal side, guiding to 9 to 11 million tons of exports there. What's the approximate production split between the high-quality tons? You know, you get the Newcastle-like pricing and then the higher-ash, lower-quality product that prices off API 2. I know you guys mentioned in your release the split is roughly even on the unpriced tons. But just specifically wondering on production between Guambo and Wilpinyong this year, I think, Mark, you might have mentioned some positive sequencing along the lines there. And then how do you guys see – going forward, the overall production levels and quality splits of that segment changing over the next several years, just given some of the extension projects, I believe, you've talked about you're working on?
spk08: I'll take that first question, and you're right. There's some better Newcastle spec product this year on an overall portfolio basis, just given the mine sequencing at the open cut. probably looking somewhere in the neighborhood of 4.5 to 5 million tons of Newcastle-spec product, which, as you know, are all exported tons.
spk00: Go ahead. Great, Mark. And I was just saying, any thoughts on how the splits in the production levels in that segment trend over the next couple of years, just given some of the projects it looks like you guys are working on?
spk08: So we haven't given any guidance beyond 24. I will say that that outlook is fairly stable for the next several years. There are extension projects that are under study. We haven't announced anything. But as we get further down the road and complete those studies, we'll be updating the market.
spk00: Okay. Got it. Maybe over to the MET segment quickly. forecasting a quarter-over-quarter drop there in shipments, I think to 1.4 million from 2.1 in the fourth quarter. Maybe get a little more color on that expected decline. Is it vessel timing? Is it something else? I know, Mark, you mentioned you're keeping an eye on the lockoutage in Demopolis as well. So any additional thoughts there? Maybe are you investigating any transportation alternatives if that continues? And then, you know, on the cost-per-time side, I'm assuming... few expected shipments driving that range higher, uh, for the first quarter versus the four year range, but any thoughts on maybe how you expect, uh, both those items met segment shipments and costs to, to trend throughout the year. Um, any other long, long moves, uh, or so to, to flag, I think you flagged one in the first quarter.
spk08: Yeah, I'll start with the, uh, the volumes just address the first quarter. Uh, some of that was covered in my remarks. Uh, This is typical, or I should say we've experienced this the last couple of years. Really, there's a long, long move at Metrop that's bringing down some first quarter volumes, and then there's just typical mine sequencing at the CMJV. It did have an absolutely fantastic fourth quarter, but just where they're at in the mines and the pit, there will be lower production coming in the first quarter. So it is less than rateable, similar to last year's circumstances. it will increase as we go throughout the year to make up that full balance. And then, Jim, do you want to cover the lock issue?
spk07: Yeah, Nate, with the lock issue, the timing that we have, that industry has from the Army Corps of Engineers is for the locks to be back in service sometime in mid-May. That's their current estimate. And so in the interim, we've made alternate transportation plans routes. We've got two different ones. One's all barge and the other one's barge and rail that we're putting in place to keep the coal moving. We don't see that impacting our first quarter volumes or our full year volumes for Shoal Creek sales volumes. We do think there may be a dip in the second quarter depending on when that lock gets back in place with the sales tons in the second quarter, but again, it won't affect the full year sales numbers for Shoal Creek.
spk00: Very helpful color, guys. Thank you. And then maybe just one more. Looking at the U.S. thermal business, you flagged how low nat gas prices, high stockpiles are weighing on demand. There did a couple of contract buyouts, I think. So if I look at PRB in particular, a fantastic year for you guys from that segment, guiding to sales that are maybe only down a million or two tons, I think it's a midpoint year over year. Obviously, you've already contracted 85 million tons there as well. So Maybe can you talk about how conversations have gone or are going with your utility partners out there, whether or not you feel like there could be pressure on that number eventually just given the current market dynamics we're seeing?
spk10: Yeah, hi, it's Malcolm here.
spk06: I'll take that one. We're very comfortable with the way that we're sold and the level that we're sold to. I think in terms of the market this year, we might see the generators going to the spot market to a lesser degree than they have in previous years. but we're pretty comfortable with that contracted level and getting that delivered.
spk00: Thanks, Malcolm. I appreciate that. I'll leave it there. Very helpful, everyone. Thank you for your time and information, and best of luck in 24. Thank you.
spk11: Thank you so much. The next question, please.
spk03: The next question comes from Chris LaFemmio of Jefferies. Please go ahead.
spk01: Thanks, operator. Hey, guys. Thanks for taking my question. So just actually a couple of questions around the met coal business and around capital allocation. So you have the ramp-up of North Grignolo, which I assume is going to be premium low-vile product that gets benchmark pricing. Is that accurate?
spk06: Absolutely. In my opinion, and a lot of people's opinion, this is the supreme coal, the top-level coal, and most likely at the top level or at a premium.
spk01: And is that true over the reserve life of the asset, or does the quality degrade over time?
spk07: That's very true over the whole life of the asset. The Ward's Well Reserve Edition is the same type of quality, so we don't expect any degradation in the quality at all as we transfer from the old North Green Yellow Reserves to the Ward's Well Reserves, same quality.
spk01: That's very encouraging. The markets are beginning to believe in kind of stronger for longer met coal pricing. And, you know, you're generating cash flow now. You're pivoting to growth in met coal. You have fairly substantial organic growth. But would you consider looking at M&A opportunities, particularly in met coal, if they were to arise? Or is really the focus now on delivering their organic growth projects and continuing with the capital returns?
spk07: Yes. Chris, our focus is on delivering the shareholder returns. and the organic growth is always the top of our list because it's the least risk. We have the most control over that, and that continues to be our focus internally. Now, as M&A comes along, we opportunistically look at anything that comes our way. We always take a look at it, Chris. Now, how active we are is a different thing, but as things come our way, we take a look at it and then make a determination if it could benefit our shareholders or not, but it's It's down the list. Organic opportunities are at the very top of the list.
spk01: Yeah, what's nice about the buyback is that you're basically increasing your production on a per share basis at a low valuation. And as you're ramping up your Metco volumes and reducing your share count, the leverage of the Metco market obviously becomes much greater. So just an observation. We definitely like that. And good luck with it all. And thanks for taking my questions.
spk07: Thank you, Chris. That's the exact same observation we have, too.
spk11: Thanks for your comments. I think we can take the next question.
spk03: The next question comes from Michael Dudas of Vertical Research Partners. Please go ahead.
spk04: Morning, Carla, gentlemen. Morning. Two questions. First, on Thermal US. Jimmy, you mentioned about some, and we've seen in the markets, some coal plants closures being deferred. given the dynamics on grid and reliability, et cetera. Uh, maybe you could share with us like relative to maybe six to 12 months ago and how you're looking at your customer base. And has there been any major changes on over the next several years or maybe even sooner, the retirement on, on your customers and where you're selling the coal? Is that changed? Is that maybe it'll lengthen the opportunity to, to monetize your reserves, uh, in the, in the U S just want to get a thought about that.
spk07: Yeah, Mike, uh, The discussions we have with our customers is one of the things that we've noticed is now desires to have longer-term contracts put in place because of the combination of the concern about the reliability of supply and the potential for plants having longer lives than was originally thought to be the case. And I would say that the conversations we're having with our customers and what we're seeing is a plant that maybe we're going to close in the next few years looking at them going out to 29 or 30. Nobody's making commitments or predictions beyond that, but it is a very good trend to see that occurring. And again, Mike, as I'm sure you know, the issue is reliability, right? The reliability of the grid backed up by baseload power and the need to keep these plants around to do that. So it's an encouraging start, getting a getting us through stronger through the end of this decade, and we'll see where it leads to from there.
spk04: I appreciate those thoughts. Secondly, as you know, a little bit of market intelligence on your part, as you look out maybe to the second half of this year, do you think there's better chance for the thermal markets to recover nicely or see pressure on the seaborne met side, you know, given where, fundamentals are. I agree with Chris's thought about the scarcity of met coal, but how are you thinking, given what you're seeing relative to, of course, the high inventories and gas prices, how that plays through on the supply side and such as we move over the next 6-12 months?
spk07: Before we answer this, I want to make sure we got the question clear. Are you talking about Seabourn Thermal and Seabourn Met? Yes. Thank you.
spk06: Yeah, sure. I'll take that. When it comes to the seaborne met market, we're quite encouraged by what we saw during Q4 with increased crude steel production rates outside of China. And we expect those rates to continue during Q1 and into Q2. And we also are encouraged in the metallurgical coal space by very constrained supply. So supply hasn't got back to those 2019 levels, which we'll use as a bit of a baseline to look at that. And we still see supply challenged moving through 2024. Going to thermal coal, Newcastle coal is in solid demand. However, at times, we get a little ahead of the demand. So where we sit right now with prices around $120, we think that supply is a little ahead. We had quite a strong supply growth out of East Coast Australia during Q4. But we think the prospects for Newcastle thermal coal, and that's the coal that we really put into the export market, improve as we move through the year. We've still got inventories to be taken down in the Northern Hemisphere, So, you know, we're optimistic about the rest of the year.
spk10: Excellent, Malcolm. Thank you very much. Thank you. Operator, do we have another question?
spk03: The next question is a follow-up from Lucas Pipes of B. Reilly Securities. Please go ahead.
spk05: Thank you very much, Operator. Thank you very much for taking my follow-up question. My first one is on Wilping Yong. I looked at the technical report some time ago, and that's last year's technical report, I believe, and it showed kind of lower volume starting this year. I wondered if you could maybe comment on that. I guess we'll get an updated version with the 10K. But if you could maybe comment on kind of mind of life of Wilping Yong and your outlook on production for this year and the coming years. And then I guess you have to kind of net that against what goes domestic versus export. So if you could comment on that and kind of the net contribution of Wilping Yong to your seaborne thermal portfolio over time, I would really appreciate the color. Thank you.
spk07: Lucas, we'll have Malcolm talk about the contracting of the domestic versus the export and some color on that to the extent that we can talk about that. Then we'll follow up with your question about the reserves and the outlook. Malcolm, if you could go first.
spk06: As we move past 2027, 2028, the proportion of export coal we expect to increase. However, There are some extension options and production options to increase on that as well at Wolf and John, which we've got a very busy drilling program there at the moment.
spk08: Year over year, we're probably looking at, you know, it's only about 300,000, 400,000 tons lighter at 24 versus 23. So as Malcolm says, I would say the export volumes are probably similar year over year as well. So a pretty consistent performance there, and obviously we already mentioned the better performance out of the wild bokeh time increasing the proportion of new gas.
spk05: Got it. And should I think about kind of the higher output versus the prior plan as efficiency gains and unanticipated kind of optimization opportunities? How should I think about that?
spk08: Yeah, I think it's a combination of both of those things, Lucas. We continue to mine out of areas. Looking forward, going out beyond 24, certainly there's studies. We talked about that earlier that we are conducting. There's several expansion opportunities, and we'll continue to study those. And when we get further down the line, you'll see an updated production profile and a technical report.
spk07: Lucas, maybe also you're talking about WAMBO, Underground, we come out of that Longwell move at the end of last year and have the Longwell running this year, too. I'm not sure what timeframe you're talking about with the tonnage profile.
spk05: Yeah, that was kind of Wilping Yong over the next couple years. No, very helpful. I appreciate that discussion. That gives some helpful context. A follow-up on Wartswell, I think earlier you mentioned $50 million of capital this year. I wondered if you could maybe expand on what you would envision to invest in with that capital. Is it machines? Is it infrastructure for the eventual extraction of those reserves? We would appreciate your comments on that. Thank you.
spk08: Yeah, I think it's a combination of both, Lucas. I mean, there'll be some equipment. Certainly, we'll begin driving in underground development toward those reserves, which is all capitalized. So that's the preliminary estimate of $15 million for 2024.
spk05: Okay, that's helpful. And then on the domestic side, I wanted to kind of ask about your contract portfolio beyond this year 2021. Can you frame up kind of where the book stands as a percentage of this year's production for 2025 and ballpark, what sort of pricing direction should we anticipate? Thank you.
spk07: Yeah, Lucas, for 2025, our domestic book right now, if we look at the PRB and we gauge it against the midpoint of the guidance this year, we're better than 60% committed. And on the other, U.S. thermal, same way, if you look at the midpoint of guidance this year, and you take that to 2025, we're about 75% committed. And we have not yet issued any outlook on pricing for 2025.
spk05: All right. I appreciate it very much.
spk10: Again, best of luck. Thank you, Lucas. Thank you, Lucas.
spk02: This concludes our question and answer session.
spk03: I would like to turn the conference back over to Jim Grech for any closing remarks.
spk07: Well, thank you all for joining us today. I'd especially like to thank our employees for remaining focused on safety and for continuing to execute on our various initiatives. I'd also like to thank our investors, customers, and vendors for your continued support. Operator, that concludes our call.
spk03: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.
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