• Electric Sales: $56.8 million for the quarter, down from $71 million in the prior year period.
• Coal Sales: $32.8 million for the quarter, down from $88.6 million in the prior year period.
• Total Revenue: $90.9 million for the quarter, compared to $161.2 million in the prior year period.
• Net Loss: $10.2 million for the quarter, compared to a net income of $16.9 million in the prior year period.
• Operating Cash Flow: Improved to $23.5 million for the quarter, up from $18.1 million in the prior year period.
• Adjusted EBITDA: Negative $5.6 million for Q2, compared to $35.3 million in the prior year period.
• Capital Expenditures: $13.1 million in the second quarter, with year-to-date CapEx at $28 million.
• Bank Debt Reduction: Decreased by $31.5 million during the second quarter.
• Total Debt: Decreased by 41% from $141 million as of December 31, 2023, to $83 million as of June 30, 2024.
• Total Liquidity: Improved to $60.7 million as of June 30, 2024.
• Leverage Ratio: 2.12 times as of June 30, 2024.

• Warning! GuruFocus has detected 6 Warning Signs with HNRG.

Release Date: August 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Hallador Energy Co (NASDAQ:HNRG) is undergoing a strategic transformation to increase value by expanding from fuel production to wholesale electricity sales.
• The acquisition of the Merom power plant has enabled Hallador Energy Co (NASDAQ:HNRG) to transform fuel into higher value wholesale electricity.
• The company has signed a memorandum of understanding with Hoosier Energy and WIN REMC to increase value and drive margin expansion through wholesale electricity sales to industrial users.
• Hallador Energy Co (NASDAQ:HNRG) has a forward sales book totaling approximately $1.4 billion, indicating strong future revenue potential.
• The company has significantly reduced its bank debt by $31.5 million, improving its financial position and leverage ratio.

Negative Points

• Electric sales for the quarter declined to $56.8 million from $71 million in the prior year period due to low energy prices and decreased dispatch rates.
• Coal sales dropped significantly to $32.8 million from $88.6 million in the prior year period, driven by reduced coal production and customer delivery slowdowns.
• The company reported a net loss of $10.2 million for the quarter, compared to a positive net income of $16.9 million in the prior year period.
• Adjusted EBITDA was negative $5.6 million for Q2, a significant decline from $35.3 million in the prior year period.
• The recent environment for spot electricity sales has been challenging, with wholesale electricity prices declining due to high natural gas production and mild winter conditions.

Q & A Highlights

Q: Can you provide more details on the bilateral power agreements with data centers, including the types of organizations interested and what criteria you use to evaluate potential customers? A: We are in discussions with various potential partners, including investor-owned utilities, cooperatives, and data center developers. These agreements are significant, involving long-term commitments exceeding a decade. We prioritize partners with strong credit profiles to ensure they can fulfill the contract over its duration. Price and the likelihood of successful transaction completion are also key considerations. - Brent Bilsland, President, CEO

Q: How long do you anticipate the negotiation process for these power agreements to take? A: The negotiation process is complex, often involving three parties: us, a wholesaler like Hoosier, and the end user. While we can't predict exact timelines, it feels like we might reach a conclusion by the end of the year or in Q1 of next year. - Brent Bilsland, President, CEO

Q: Given the softer power pricing in the first half of 2024, what are your expectations for the second half in terms of generation and pricing? A: The market has improved, with gas inventory levels decreasing from 38% to 16% above the 5-year average. We expect higher dispatch rates in the second half, especially since we have no scheduled outages. July alone exceeded 25% of our first-half generation. We anticipate better margins and more profitable operations as gas prices rise towards the end of the year. - Brent Bilsland, President, CEO

Q: What impact did the restructuring of Sunrise Coal have on your operations and costs? A: The restructuring included a workforce reduction of over 25% and a focus on more profitable units. This led to improved efficiency, with clean tons per foot of advancement increasing by 27% from January to June. Our cash costs at Oaktown improved to approximately $44 per ton in June, down from $50 for the quarter. - Brent Bilsland, President, CEO

Q: Can you elaborate on the financial performance and challenges faced in Q2 2024? A: Electric sales declined to $56.8 million due to low energy prices and reduced dispatch rates. Coal sales also decreased to $32.8 million due to reduced production and customer deliveries. We reported a net loss of $10.2 million, driven by lower coal operations and energy prices. However, we improved operating cash flow to $23.5 million and reduced bank debt significantly. - Marjorie Hargrave, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.