Operator: Our next question will come from Nathan Martin with The Benchmark Group. Please go ahead.
Nathan Martin: Hey, good morning, guys. Thanks for taking the questions.
Jimmy Brock: Morning.
Nathan Martin: Bob, could I actually get a similar breakdown for 2023 tons that you just gave Lucas for ’24? In other words, how many tons are fixed versus how many tons are open to fluctuations in index pricing, whether that’s PJM West or API2?
Robert Braithwaite: Sure. So, we have — again, we have 2.5 million tons in 2023 that’s linked to power, we have 8.2 million tons right now slotted for export — or contracted, I should say, for export. Of that 8.2 million tons, we have about 5 million tons that are linked to API2 prices, and then of that 5 million tons, 3 million tons of those have ceiling and floor prices incorporated in the contracts. And then, the balance or 13.2 million tons is domestic and fixed price.
Nathan Martin: Very helpful, Bob, appreciate that. And I guess sticking with API2 for a second, what — with the pullback we’ve seen, what did netbacks look like at today’s prices? Is that — are still open for you guys? Would also be helpful to get any kind of sensitivity there? I know you said you’re assuming a $165 price in your pricing guidance for ’23. And then, you also mentioned that your long-term export contract with the collars for the year. Any color on where the netbacks are relative to the floor and ceiling on those tons? Thanks.
Robert Braithwaite: Sure. I think we mentioned in the past that the coal that we sell into Europe when you look at an API2 price use somewhere around 65% to 70% of that price, and that gets you back to an mine price, and that, again, takes into account discounts, quality adjustments, along with freight. So, when you’re looking at $140 API2 price, you’re talking somewhere in that $90-range back to the mine. And again, that’s really specific to coal that we’re selling into Europe. As far as sensitivity is concerned, I will tell you it’s not linear because we do have different floors and ceilings across several contracts. But a good estimate is for every dollar change in API2 prices; our overall portfolio change is approximately $0.10, so it has a very similar sensitivity to our power price as well.
But again, that depends on loading months of vessels. Most of our contracts are priced based on the monthly average of the API2 price of month of it loading. But as we do with our netback sensitivity, we’ll continue to refine this as well every quarter.
Nathan Martin: That’s very helpful, Bob, appreciate that. And then, the domestic side, that we’ve also seen weaken as well given the mild start to the winter season. How are utilities from a stockpile perspective at this point, if you guys can see? Is there any possibility of deferrals as we move forward with the year or is it still a little early to think about that?
Robert Braithwaite: Yes, I think it’s early, Nate. There certainly has been an increase in natural gas production since the end of last year. But I really think the biggest issue here is really demand, right? I don’t believe that there is that much of a supply response from the coal side right now. And I personally believe that as coal supply remains tight and I expect that to continue as we head into summer. Right now, inventories across domestic customers are at comfortable levels. However, that can change very quickly as we start seeing demand out of the U.S. and Europe for that matter. And I also tell you that many of our customers were sitting at less than 20 days of inventory heading into winter. As mentioned this past month, certainly afforded many to continue to build what I would call healthy levels. However, we do have several customers that are still telling us that they likely will have some spot needs to the back-half of the year, so, very positive there.
Jimmy Brock: And to Bobby’s point, most of these coal inventory builds that we have seen, they are certainly not due to oversupply. They are related more to demand. And, we expect that second-half year we can’t do anything with the weather unpredictive, but if that changes, we have a difficult summer up, we have had those inventory levels could become less than normal pretty quickly.
Nathan Martin: Appreciate that, guys. Any comments or thoughts on coal to gas switching that’s occurring today, you know, net gas around $2.50 or so?
Jimmy Brock: I mean we are definitely seeing gas dispatch little bit more now than it has in the past just based on this $2.50 range and where coal prices are. But, again I would tell you that as soon as demand picks up, I think you are going to see more coal units come online.
Nathan Martin: Okay. And then, just one final question if I may, any thoughts on cadence of shipments or even pricing as we move through the next four quarters, I think one of your peers noted that it was potentially sold out for the first-half. Expected pricing to improve in the second-half as we see hopefully the expectation for Europe will be back up in the market shore up supplies for the next winter.
Jimmy Brock: I think you ask the question. We’re not too concerned about the first-half of the year. We are pretty much committed and sold to that. Back-half is where we have some open comps. And Bobby can go into more detail there. But, we still feel really good about our ability to move coal into international markets and demand picking up second-half of the year.
Robert Braithwaite: Yes. Again, I think Europe there is a potential opportunity there for the second-half of the year. Right now, the gas that they have in storage today is Russian gas. And once that depletes, they could be relying fully on LNG. And then, I also I think is important message is that our fifth longwall Enlow Fork is our low sulfur longwall. We have been talking about it. It’s the best quality. It’s certainly opening up new markets for us. And also, it gives us the ability to ship more into the crossover market. And based on where prices are today, that’s the best market out there that’s yielding triple digits back to the mine. So, we will continue to focus on those opportunities. And obviously, sell our coal to places that yield the best realization back to us.
