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Peabody Energy Corp (OTCMKTS:BTUUQ) Hits The OTC

Peabody Energy Corp (OTCMKTS:BTUUQ) Hits The OTC
Written by
Alex Carlson
Published on
April 27, 2016
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InsidrFinancial

Peabody Energy Corp (OTCMKTS:BTUUQ) performed as expected as soon as shares hit the OTC. What was once garbage on the NYSE turned into a gem on the OTC. OTC investors love penny stocks and there's nothing like buying an ex big board stock and getting a rally after many investors sell and get out at the bottom due to the delisting. This played right into our hands. We and our subscribers were able to accumulate shares under a buck. After getting out yesterday after 100% gains, we're asking what's next for Peabody Energy.Peabody Energy is the world's largest private-sector coal company and a global leader in sustainable mining, energy access and clean coal solutions. The company serves metallurgical and thermal coal customers in 25 countries on six continents. The company's Powder River Basin operations employ approximately 1,500 workers with approximately 1,150 employed at the North Antelope Rochelle Mine following these reductions. Overall, Peabody claims the Powder River Basin operations injected $5.5 billion in direct and indirect economic benefits into the region this past year.On April 13, Peabody Energy Corp. filed for bankruptcy. The company is seeking to reorganize U.S. operations in federal court in its hometown of St. Louis, reducing an estimated $10.1 billion in debt, according to court filings. It’s the biggest U.S. corporate bankruptcy this year by liabilities. Peabody, which had revenue of $5.6 billion in 2015 and about 7,100 employees globally, will keep operating during the reorganization, according to court papers.Besides the debt load, the outlook for coal miners remains bleak. U.S. coal industry conditions have remained challenged, impacted by an oversupply of natural gas and mild winter weather. The U.S. coal industry has seen unprecedented shipment declines this year. Heating degree days year-to-date are 17 percent lower than last year, with March heating degree days down nearly 30 percent versus the 10-year average. Powder River Basin coal, traded this month at $9.05 a ton, the lowest price in more than three years and 16 percent below the five-year average.By filing for bankruptcy in the U.S., it allowed Peabody to leave its Australian assets out of the filing. Peabody spent $4 billion in 2011 to acquire Australia's MacArthur Coal Ltd. MacArthur is one of the leading producers of metallurgical coal, which is used to produce steel. The problem for Peabody is that the company used debt to buy MacArthur and the price of metallurgical coal has tumbled about 75 percent since its 2011 peak.The good news for the company and its employees is that the bankruptcy will allow Peabody to cut debt and improve cash flow. Most of Peabody’s mines make money, even with the price of coal down. To help fund operations during bankruptcy, Peabody will get $800 million in financing from Citibank.Peabody was hoping to avoid bankruptcy by selling its New Mexico and Colorado coal mines. However, the deal with Bowie Resource Holdings fell apart. It was this deal that shareholders were counting on and why many were holding on to the stock. If these deal had happened, Peabody was looking to avoid a sale of most of its U.S. mining assets by raising new debt that was secured by the Australian subsidiary and another unit unencumbered by company guarantees.The good news as we see it is that we think the global coal market has bottomed. Prices have started to recover and the market will improve while Peabody restructures. Demand for metallurgical coal out of China has increased as steel production ramps up there. The U.S. supply/demand imbalance is starting to correct as demand increases and there's a massive reduction in coal production. These are all positive factors, however, we have no idea what will be left for common shareholders as Peabody navigates the bankruptcy process.We are not bankruptcy experts. That's outside our pay grade and we tend to leave bankruptcy court to the big boys like Carl Icahn that have lawyers and the resources to fight. We're penny stock investors and knew that BTUUQ would bounce just like Arch Coal Inc (OTCMKTS:ACIIQ) did when it hit the OTC. We'll gladly take our 100% gains any day and let the big boys fight it out. We're out looking for our next microcap runner. We will be updating Insider Financial as soon as we know more. Sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in BTUUQ and have not been compensated for this article.

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