BTU earnings call transcript, November 4, 2026

Today are Peabody's president and CEO Jim Grek, Chief Financial Officer Mark Spurback, and Chief Commercial Officer Malcolm Roberts. After our prepared remarks, we will open up the call for questions. Before we begin, I want to remind you that our remarks today will include forward-looking statements. Please review the statement contained in our earnings release and consider the risk factors referenced. There, along with our filings with the SEC. I'll now turn the call over to Jim.

The challenge is not a single fault or isolated geological event. The Long Wall has encountered multiple complex geological structures across the tailgate. Face and headgate areas, and the combination was more complex than our mine plan assumed. Mechanical downtime while navigating these faulted zones allowed additional ground pressure and roof conditions to develop ahead of the face. Under these circumstances, elements of the current longwall design were less effective at managing changing conditions than expected, which further slowed progress. Importantly, we do not view these challenges as a resource quality, reserve, or long-term mine plan issue. Vaulting and structural complexity are common characteristics of Bowen Basin operations. What this first panel has shown us is where our equipment and operating practices need to adapt to operating efficiently in these conditions. In the current panel, we have approximately 110 meters to go before the major fault structure is behind the long wall. We still expect some geological interruptions throughout the remainder of the panel. Our team has identified targeted engineering modifications and operating adjustments that will give us greater flexibility when mining through similar conditions in future panels. For each longwall shield, there are two key equipment upgrades being scheduled around planned downtime to limit disruption to production.

The first is a baselift power increase. Estimated at one and a half to two million dollars total for all shields which we plan to complete in the current panel during scheduled maintenance. The second is improved to the shield extension flipper. Estimated at five to ten million dollars total for all shields which we plan to install during the next long wall move in 2027. We have also worked to mitigate the risk of the next panel with an extensive pre-consolidation plan for the faulted zone. Where we do encounter faulting, we will be better prepared. With improved longwall positioning, both equipment upgrades in place and steps to stabilize and strengthen the ground ahead of the fault. Together, these steps are designed to deliver more consistent longwall performance at some terrain, while our focus continues to be on safe execution. Beyond our current operating priorities, responsible stewardship remains central to how we manage our assets throughout their life cycle. Anybody received the Office of Surface Mining Reclamation and Enforcement's National Award for Excellence in Reclamation, the highest honor in this field. for work at the Forum of Seneca II West Mine in Colorado. Since the mine's closure in 2009, Reclamation has transformed the site. This national recognition underscores the lasting impact of our commitment to responsible reclamation. That same focus extends to Peabody Development.

We are pursuing new ways to create value from our land and resources. Based on promising germanium concentrations, we are nearing agreements with a major customer and a processing partner. To our R3 joint venture with RWE, we are advancing solar and battery storage projects on reclaimed mine land with potential success fees beginning in 2020. We're also evaluating opportunities to pair my mouth generation with data centers. Our approach remains capital light and partnership driven. We're appreciating us for new revenue streams and long-term growth. Turning to the U.S. regulatory environment, as the nation faces rising electricity demand, EPA's partial report repeal of the power plant carbon rule, which required unproven and uneconomical technology, and its proposal to resend the engagement finding represent important steps toward restoring a more common-sense energy policy for our country. I commend the DOE, EPA, and the Trump administration for recognizing the critical role of reliable, dispatchable, and affordable energy. With that perspective on our operations and the regulatory environment, I'll turn the call over to Malcolm to discuss the U.S. and global market fundamentals.

Picking at $285. As lower Chinese production resulted in Chinese metallurgical coal imports increasing 25%. Chinese safety inspections and production restrictions in Shanxi following the major mine accident in May have particularly affected high quality coking coal supply. An estimated... 70 million tonnes of Chinese domestic metallurgical coal production have been removed from the market year to date. For context, the global... ...bore metallurgical coal market is approximately 80 million tonnes per quarter. Supply is expected to remain constrained into 2027. Supporting in India... ...metallurgical coal buying has been steady but remains selective. Stronger steel prices following the monsoon season slowdown leaves scope for higher imports during the fourth quarter. While tighter Russian PCI supply has renewed Indian buying interest in supply from Australia, through September, premium smoking coal and PCI prices were up 30... 21% and 19%. Against this backdrop, we completed additional spot sales to major Chinese steel producers. Advanced 2027 term discussions and delivered an initial Centurion cargo to an Indian public sector steel producer. U.S. high-vol A coal prices have improved this year, but the price discount to Australian premium hard-coking coal remains material as incremental supply. The delivered competitiveness in Asia renewed Chinese access with an anticipated lower Chinese import tariff.

It will improve demand when implemented. Recent US-China trade discussions have outlined China's commitment to at least 11 million tonnes of US origin imports in 27 and 2028. This import volume is anticipated to be primarily cokey coal. Any resulting trade flows are expected to be broadly neutral for Australian prices. Turning to seaborne thermal coal, Newcastle pricing averaged approximately $135 per tonne during Q&A. Trending higher to finish the quarter, above $145 per tonne. Price support came from several factors. Elevated LNG prices, slower Chinese production. China has showed continued interest in Australian thermal coal, particularly for mid-calorific, higher ash products. ...to substitute constrained Russian and Indonesian supply. As a result, API5 pricing in October spot API... ...accelerated even further, reaching $115 per tonne, the highest level recorded for the index since May 2023. Shifting to the United States... Third quarter powder river basin sales fell below guidance as cooler weather early in the quarter, strong renewable generation and low natural gas prices weighed on coal demand. An un... Standard customer plant outage also reduced shipments. This winter's demand profile will be particularly dependent on the El Nino weather pattern, gas prices... ...and renewable output. Looking beyond the near term, data centres, manufacturing and electrification point to sustained...

...electricity demand growth. That potential has yet to translate into materially higher coal purchases. Project timing will remain a risk. In summary, Seaball... Markets remain constructive, with supply constraints and energy security considerations supporting both metallurgical coal and thermal coal. U.S. thermal fundamentals are more mixed. But coal continues to provide reliable supply of electricity during periods of... With that, I'll turn the call over to Mark for a review of the financial results.

with higher production from both Wilpin Young and Lambo, selling into very strong Seaborne energy coal markets.

Seaborne Metallurgical shipped 2.2 million tons. Exceeding company... ...expectations, driven by higher production at Metropolitan, following a quicker than planned long wall move. Revenue per ton increased 11% from the second quarter to... ...$65. Costs were above target at $162 per ton, primarily reflecting higher-cost faulted conditions and lower production at Centurion. The... ...segment turned in its first positive EBITDA quarter of the year, and with higher volume at Shoal Creek and Capabella, we are expecting a stronger fourth quarter. Our U.S. thermal business generated 40.5 million of adjusted EBITDA, more than double the second quarter result. In the Powder River, Basin shipments increased to 19.6 million tons. Together with cost-focused management, costs improved 8% to $12.94 per ton. But remained above target due to lower-than-anticipated volume as a result of lower coal burn. The segment generated adjusted EBITDA of $15 million. The other, higher-calorie... ...value U.S. thermal business shipped 3.4 million tons, 300,000 less than anticipated. Lower shipments at Bear Run were due to lower coal burn, and a 20-mile... ...customer had a generation unit down for an extended period. The resulting mix increased average cost per ton above expectations in the quarter. ...offset by higher average realized revenue per ton. The segment generated $25.5 million of adjusted EBITDA broadly consistent with the second quarter.

Turning to the balance sheet, we ended the quarter with $434 million of cash and $887 million of liquidity. In the third quarter, we repurchased... $39 million of the remaining 2028 convertible notes for $58 million, and issued a call for the remaining $40 million, electing cash settlement with an anticipated mid-November closing. The cash repurchase completed in the third quarter continued our return of capital to shareholders, with the $19 million cash premium representing an additional $700,000. shares repurchased, bringing the year-to-date amount to 5.7 million shares. Together with $27.4 million of cash dividends, we have returned $192 million to shareholders in 2026. through September 30. Looking ahead to the fourth quarter, seaborne thermal volume is expected to be 3.6 to 3.8 million tons, including 2.5 to 2.7 million. Export tons. Approximately 1.6 million tons of Newcastle product and 0.8 million tons of higher ash Wilpin Yon product remain unpriced. Costs are expected. Costs are expected to be between $46 and $51 per ton. Significant improvement compared to the third quarter is driven by substantially higher volume from Wombo. As a result of mine sequencing, improving quality mix to approximately 65% Newcastle, 35% higher ash coal. Strong performance through the first nine months of the year. Has allowed us to increase full year seaborne thermal export volume guidance by 200,000 tons. Seaborne metallurgical volume is expected to be 2.2 to 2.4.

million tons as higher volume at Shoal Creek and Capabella offset lower volume at Centurion as we work through the difficult faulted conditions that Jim discussed. Realizations are expected to average approximately 70% of the premium hard-coking coal index with costs of $150 to $160 per ton. Lower fourth quarter expectations. Expectations at Centurion resulted in a reduction to full-year seaboard metallurgical volume of 600,000 tons and increased costs $15 per ton.

Outer River Basin shipment 18.5 to 21.5 million tons at an average price of approximately $13.75 per ton at costs of $13 to $13. $13.50 per ton. With a lower coal burn during the third quarter and modest Q4 forecasts, we have lowered full year volume by 7.5. million tons, increasing full year costs by $1 per ton. Other U.S. thermal volume, which has an average calorific value greater than 11,000 B. is expected to be 3.6 to 4 million tons at an average price of approximately $59 and costs of $48 to $52 per ton. Similar to the PRB, we have lowered full-year volume guidance by 200,000 tons due to lower anticipated cold air. Capital expenditure guidance was reduced by $40 million. Related to opportunistic deferral of development at Centurion North in closing Peabody exits the quarter in strong financial position poised to leverage our. Diversified assets to generate free cash flow from strong seaborn markets. With that, I'll turn the call back to Jim.

Everybody's opportunity is clear. Build on the strength of our thermal businesses, realize Centurion's long-term potential, and unlock additional value from our... ...asset base. Delivering on that opportunity starts with safe, reliable operations and disciplined cost management. We recognize the work ahead at Centurion and remain focused... ...on demonstrating improved progress. Our responsibility is to translate the strength of this portfolio into lasting value for our shareholders. With that operator, we are pleased to open...

The first question comes from Chris.

Chris LaFamina with Jeffries. Please go ahead.

with B Reilly Securities. Please go ahead.

Please go ahead.

The next question comes from Matthew Key with Texas Capital. Please go ahead.