Hallador Energy Company Reports Second Quarter 2024 Financial and Operating Results
- Q2 Total Revenue of $90.9 Million -
- Q2 Net Loss of $10.2 Million or $(0.27) Earnings per Share -
- Q2 Operating Cash Flow of $23.5 Million -
- Q2 Adjusted EBITDA loss of $(5.8) Million -
TERRE HAUTE, Ind., Aug. 06, 2024 (GLOBE NEWSWIRE) -- Hallador Energy Company (NASDAQ:HNRG) ("Hallador" or the "Company"), today reported its financial results for the second quarter ended June 30, 2024.
Brent Bilsland, President and Chief Executive Officer, stated, "We made progress during the quarter towards our strategic and deliberate path to transform Hallador and capture increased value as we advance our products and services up the value chain. Since acquiring the Merom Power Plant in 2022, we have expanded our offerings from fuel production to wholesale electricity sales, and we are now moving further up the chain to begin powering the industrial end user, including through a signed Memorandum of Understanding (MOU) with Hoosier and WIN REMC earlier this year. Since that time, we have carried out a data center targeted Request for Proposal (RFP) that has received a robust response and is in active negotiations, further strengthening our conviction that power is in critical demand and that we possess a crucial component to the success of these data centers."
"In the near term, we are facing a challenging market for spot electricity sales. Record natural gas production last year, combined with the second warmest winter in 25 years, has led to a surplus in natural gas inventory. This imbalance has driven down both gas and electricity prices, resulting in an energy market where pricing was above our cost structure only 40% of the time during the first half of the year."
"In response to the current environment, we have focused on strengthening our balance sheet by reducing debt and improving our total liquidity to $60.7 million at quarter-end. This was driven in-part by the receipt of a $45 million prepayment during the quarter for an 11-month forward power sale, representing 22% of our projected annual output. As natural gas inventories decrease and prices recover later this year, as we currently expect, we are well positioned to navigate the current environment and drive future power sales that can reshape Hallador's financial profile."
Second Quarter 2024 Highlights
- The Company generated $23.5 million in operating cash flow during the second quarter, which partially supported repayment of debt and funding capex.
- Total bank debt was $45.5 million with total liquidity of $60.7 million at June 30, 2024. This compares to total bank debt of $91.5 million and total liquidity of $26.2 million at December 31, 2023.
- The Company's leverage ratio was 2.12x at June 30, 2024, compared to 1.32x at December 31, 2023.
- Capital expenditures were $13.2 million for the second quarter and $28.0 million year-to-date. The Company remains on track with its targeted $43 million capital expenditure budget for 2024.
- Hallador continues to emphasize electric sales as an independent power producer.
- Electric Sales were $56.8 million compared to $71.0 million in the year-ago period. The decrease was driven by the buildup of natural gas inventory levels in the broader market reducing the demand for and pricing of electric power.
- Coal Sales were $32.8 million compared to $88.6 million in the year-ago period. The decrease was driven by lower demand due to lower natural gas prices.
- The Company continues to focus on forward sales to hedge its energy position.
- At quarter-end, Hallador had total forward energy and capacity sales to 3rd party customers of $871.7 million through 2029.
- The Company signed an 11-month, $45 million forward power purchase agreement (PPA) during the quarter with one of the largest global asset managers.
- Negotiations continue to advance in response to the Company's data center targeted RFP, with the potential to sign a long-term contract.
- At quarter-end, Hallador had total forward energy and capacity sales to 3rd party customers of $871.7 million through 2029.
| Financial Summary ($ in Millions and Unaudited) | |||||||||||
| Q2 2023 | Q1 2024 | Q2 2024 | |||||||||
| Electric Sales | $ | 71.0 | $ | 58.8 | $ | 56.8 | |||||
| Coal Sales - 3rd Party | $ | 88.6 | $ | 49.6 | $ | 32.8 | |||||
| Other Revenue | $ | 1.6 | $ | 1.3 | $ | 1.3 | |||||
| Total Revenue | $ | 161.2 | $ | 109.7 | $ | 90.9 | |||||
| Net Income (Loss) | $ | 16.9 | $ | (1.7 | ) | $ | (10.2 | ) | |||
| Operating Cash Flow | $ | 18.1 | $ | 16.4 | $ | 23.5 | |||||
| Adjusted EBITDA* | $ | 35.3 | $ | 6.8 | $ | (5.8 | ) | ||||
* Non-GAAP financial measure, defined as operating cash flows less effects of certain subsidiary and equity method investment activity, plus bank interest, less effects of working capital period changes, plus other amortization
Adjusted EBITDA should not be considered an alternative to net income, income from operations, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP. Our method of computing Adjusted EBITDA may not be the same method used to compute similar measures reported by other companies.
Management believes the non-GAAP financial measure, Adjusted EBITDA, is an important measure in analyzing our liquidity and is a key component of certain material covenants contained within our Credit Agreement, specifically a maximum leverage ratio and a debt service coverage ratio. Noncompliance with the leverage ratio or debt service coverage ratio covenants could result in our lenders requiring the Company to immediately repay all amounts borrowed. If we cannot satisfy these financial covenants, we would be prohibited under our Credit Agreement from engaging in certain activities, such as incurring additional indebtedness, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA is critical to the assessment of our liquidity. The required amount of Adjusted EBITDA is a variable based on our debt outstanding and/or required debt payments at the time of the quarterly calculation based on a rolling prior 12-month period.
Reconciliation of the non-GAAP financial measure, Adjusted EBITDA, to cash provided by operating activities, the most comparable GAAP measure, is as follows (in thousands) for the three and six months ended June 30, 2024 and 2023, respectively.
| Reconciliation of GAAP "Cash provided by (used in) operating activities" to non-GAAP "Adjusted EBITDA" (In $ Thousands and Unaudited) | |||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Cash provided by operating activities | $ | 23,522 | $ | 18,131 | $ | 39,891 | $ | 44,243 | |||||||
| Current income tax expense | — | 61 | — | 493 | |||||||||||
| Loss from Hourglass Sands | — | 1 | 1 | 2 | |||||||||||
| Loss from Sunrise Indemnity | 6 | — | 12 | — | |||||||||||
| Distribution from Sunrise Energy | — | — | — | (625 | ) | ||||||||||
| Bank and convertible note interest expense | 3,326 | 2,517 | 6,859 | 5,204 | |||||||||||
| Working capital period changes | (30,305 | ) | 12,546 | (43,480 | ) | 16,390 | |||||||||
| Other long-term asset and liability changes | (466 | ) | (253 | ) | (1,403 | ) | (704 | ) | |||||||
| ASC 606 Capacity Adjustment | (2,455 | ) | — | (3,703 | ) | — | |||||||||
| Cash paid on asset retirement obligation reclamation | (37 | ) | 566 | 602 | 931 | ||||||||||
| Other amortization | 613 | 1,728 | 2,248 | 3,378 | |||||||||||
| Adjusted EBITDA | $ | (5,796 | ) | $ | 35,297 | $ | 1,027 | $ | 69,312 | ||||||
| Cash (used in) provided by investing activities | $ | (10,720 | ) | $ | (17,081 | ) | $ | (25,570 | ) | $ | (30,548 | ) | |||
| Cash (used in) provided by financing activities | $ | (8,446 | ) | $ | (1,029 | ) | $ | (10,716 | ) | $ | (13,751 | ) | |||
Solid Forward Sales Position - Segment Basis, Before Intercompany Eliminations (unaudited):
| 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | Total | |||||||||||||||||||||
| Power | |||||||||||||||||||||||||||
| Energy | |||||||||||||||||||||||||||
| Contracted MWh (in millions) | 1.75 | 2.48 | 1.83 | 1.78 | 1.09 | 0.27 | 9.20 | ||||||||||||||||||||
| Average contracted price per MWh | $ | 36.22 | $ | 35.70 | $ | 55.37 | $ | 54.65 | $ | 52.98 | $ | 51.00 | |||||||||||||||
| Contracted revenue (in millions) | $ | 63.39 | $ | 88.54 | $ | 101.33 | $ | 97.28 | $ | 57.75 | $ | 13.77 | $ | 422.06 | |||||||||||||
| Capacity | |||||||||||||||||||||||||||
| Average daily contracted capacity MWh | 772 | 801 | 744 | 623 | 454 | 100 | |||||||||||||||||||||
| Average contracted capacity price per MWd | $ | 207 | $ | 198 | $ | 230 | $ | 226 | $ | 225 | $ | 230 | |||||||||||||||
| Contracted capacity revenue (in millions) | $ | 29.40 | $ | 57.89 | $ | 62.46 | $ | 51.39 | $ | 37.39 | $ | 3.47 | $ | 242.00 | |||||||||||||
| Total Energy & Capacity Revenue | |||||||||||||||||||||||||||
| Contracted Power revenue (in millions) | $ | 92.79 | $ | 146.43 | $ | 163.79 | $ | 148.67 | $ | 95.14 | $ | 17.24 | $ | 664.06 | |||||||||||||
| Coal | |||||||||||||||||||||||||||
| Priced tons - 3rd party (in millions) | 1.26 | 1.78 | 0.50 | 0.50 | — | — | 4.04 | ||||||||||||||||||||
| Avg price per ton - 3rd party | $ | 50.08 | $ | 50.04 | $ | 55.50 | $ | 55.50 | $ | — | $ | — | |||||||||||||||
| Contracted coal revenue - 3rd party (in millions) | $ | 63.10 | $ | 89.07 | $ | 27.75 | $ | 27.75 | $ | — | $ | — | $ | 207.67 | |||||||||||||
| Committed and unpriced tons - 3rd party (in millions) | — | 1 | 1 | 1 | — | — | 3 | ||||||||||||||||||||
| Total contracted tons - 3rd party (in millions) | 1.26 | 2.78 | 1.50 | 1.50 | — | — | 7.04 | ||||||||||||||||||||
| TOTAL CONTRACTED REVENUE (IN MILLIONS) - CONSOLIDATED | $ | 155.89 | $ | 235.50 | $ | 191.54 | $ | 176.42 | $ | 95.14 | $ | 17.24 | $ | 871.73 | |||||||||||||
| Priced tons - Merom (in millions) | 0.60 | 2.30 | 2.30 | 2.30 | 2.30 | — | 9.80 | ||||||||||||||||||||
| Avg price per ton - Merom | $ | 51.00 | $ | 51.00 | $ | 51.00 | $ | 51.00 | $ | 51.00 | $ | — | |||||||||||||||
| Contracted coal revenue - Merom (in millions) | $ | 30.60 | $ | 117.30 | $ | 117.30 | $ | 117.30 | $ | 117.30 | $ | — | $ | 499.80 | |||||||||||||
| TOTAL CONTRACTED REVENUE (IN MILLIONS) - SEGMENT | $ | 186.49 | $ | 352.80 | $ | 308.84 | $ | 293.72 | $ | 212.44 | $ | 17.24 | $ | 1,371.53 | |||||||||||||
Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Statements that are not strictly historical statements constitute forward-looking statements and may often, but not always, be identified by the use of such words such as "expects," "believes," "intends," "anticipates," "plans," "estimates," "guidance," "target," "potential," "possible," or "probable" or statements that certain actions, events or results "may," "will," "should," or "could" be taken, occur or be achieved. Forward-looking statements are based on current expectations and assumptions and analyses made by Hallador and its management in light of experience and perception of historical trends, current conditions and expected future developments, as well as other factors appropriate under the circumstances that involve various risks and uncertainties that could cause actual results to differ materially from those reflected in the statements. These risks include, but are not limited to, those set forth in Hallador's annual report on Form 10-K for the year ended December 31, 2023, and other Securities and Exchange Commission filings. Hallador undertakes no obligation to revise or update publicly any forward-looking statements except as required by law.
Conference Call and Webcast
Hallador management will host a conference call Tuesday, August 6, 2024 at 5:00 p.m. Eastern time to discuss its financial and operational results, followed by a question-and-answer period.
Date: Tuesday, August 6, 2024
Time: 5:00 p.m. Eastern time
United States local: (404) 975-4839
United States toll-free: (833) 470-1428
Access code: 933229
Webcast: HNRG Q2 2024 Earnings Call
The conference call will also be broadcast live and available for replay in the investor relations section of the Company's website at www.halladorenergy.com.
| Hallador Energy Company Condensed Consolidated Balance Sheets (in thousands, except per share data) (unaudited) | |||||||
| June 30, | December 31, | ||||||
| 2024 | 2023 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 6,446 | $ | 2,842 | |||
| Restricted cash | 4,282 | 4,281 | |||||
| Accounts receivable | 19,098 | 19,937 | |||||
| Inventory | 32,595 | 23,075 | |||||
| Parts and supplies | 39,459 | 38,877 | |||||
| Prepaid expenses | 2,027 | 2,262 | |||||
| Total current assets | 103,907 | 91,274 | |||||
| Property, plant and equipment: | |||||||
| Land and mineral rights | 115,486 | 115,486 | |||||
| Buildings and equipment | 531,413 | 537,131 | |||||
| Mine development | 164,475 | 158,642 | |||||
| Finance lease right-of-use assets | 19,869 | 12,346 | |||||
| Total property, plant and equipment | 831,243 | 823,605 | |||||
| Less - accumulated depreciation, depletion and amortization | (349,462 | ) | (334,971 | ) | |||
| Total property, plant and equipment, net | 481,781 | 488,634 | |||||
| Investment in Sunrise Energy | 2,305 | 2,811 | |||||
| Other assets | 7,176 | 7,061 | |||||
| Total assets | $ | 595,169 | $ | 589,780 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Current portion of bank debt, net | $ | 17,938 | $ | 24,438 | |||
| Accounts payable and accrued liabilities | 45,890 | 62,908 | |||||
| Current portion of lease financing | 6,204 | 3,933 | |||||
| Deferred revenue | 84,772 | 23,062 | |||||
| Contract liability - power purchase agreement and capacity payment reduction | 40,735 | 43,254 | |||||
| Total current liabilities | 195,539 | 157,595 | |||||
| Long-term liabilities: | |||||||
| Bank debt, net | 24,734 | 63,453 | |||||
| Convertible notes payable | — | 10,000 | |||||
| Convertible notes payable - related party | — | 9,000 | |||||
| Long-term lease financing | 10,699 | 8,157 | |||||
| Deferred income taxes | 5,614 | 9,235 | |||||
| Asset retirement obligations | 15,335 | 14,538 | |||||
| Contract liability - power purchase agreement | 25,076 | 47,425 | |||||
| Other | 2,002 | 1,789 | |||||
| Total long-term liabilities | 83,460 | 163,597 | |||||
| Total liabilities | 278,999 | 321,192 | |||||
| Commitments and contingencies | |||||||
| Stockholders' equity: | |||||||
| Preferred stock, $.10 par value, 10,000 shares authorized; none issued | — | — | |||||
| Common stock, $.01 par value, 100,000 shares authorized; 42,599 and 34,052 issued and outstanding, as of June 30, 2024 and December 31, 2023, respectively | 426 | 341 | |||||
| Additional paid-in capital | 186,945 | 127,548 | |||||
| Retained earnings | 128,799 | 140,699 | |||||
| Total stockholders' equity | 316,170 | 268,588 | |||||
| Total liabilities and stockholders' equity | $ | 595,169 | $ | 589,780 | |||
| Hallador Energy Company Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| SALES AND OPERATING REVENUES: | |||||||||||||||
| Electric sales | $ | 56,846 | $ | 71,017 | $ | 115,601 | $ | 163,409 | |||||||
| Coal sales | 32,801 | 88,574 | 82,431 | 183,176 | |||||||||||
| Other revenues | 1,267 | 1,603 | 2,554 | 2,943 | |||||||||||
| Total sales and operating revenues | 90,914 | 161,194 | 200,586 | 349,528 | |||||||||||
| EXPENSES: | |||||||||||||||
| Fuel | 10,439 | 32,641 | 18,498 | 88,614 | |||||||||||
| Other operating and maintenance costs | 35,912 | 41,908 | 73,394 | 74,428 | |||||||||||
| Utilities | 3,396 | 4,343 | 7,770 | 8,840 | |||||||||||
| Labor | 26,555 | 36,528 | 61,723 | 77,059 | |||||||||||
| Depreciation, depletion and amortization | 13,649 | 17,169 | 29,092 | 35,145 | |||||||||||
| Asset retirement obligations accretion | 399 | 461 | 798 | 912 | |||||||||||
| Exploration costs | 47 | 305 | 117 | 511 | |||||||||||
| General and administrative | 7,803 | 5,595 | 13,747 | 12,542 | |||||||||||
| Total operating expenses | 98,200 | 138,950 | 205,139 | 298,051 | |||||||||||
| INCOME (LOSS) FROM OPERATIONS | (7,286 | ) | 22,244 | (4,553 | ) | 51,477 | |||||||||
| Interest expense (1) | (3,735 | ) | (3,541 | ) | (7,672 | ) | (7,440 | ) | |||||||
| Loss on extinguishment of debt | (1,937 | ) | — | (2,790 | ) | — | |||||||||
| Equity method investment (loss) | (257 | ) | (217 | ) | (506 | ) | (148 | ) | |||||||
| NET INCOME (LOSS) BEFORE INCOME TAXES | (13,215 | ) | 18,486 | (15,521 | ) | 43,889 | |||||||||
| INCOME TAX EXPENSE (BENEFIT): | |||||||||||||||
| Current | — | 61 | — | 493 | |||||||||||
| Deferred | (3,011 | ) | 1,510 | (3,621 | ) | 4,430 | |||||||||
| Total income tax expense (benefit) | (3,011 | ) | 1,571 | (3,621 | ) | 4,923 | |||||||||
| NET INCOME (LOSS) | $ | (10,204 | ) | $ | 16,915 | $ | (11,900 | ) | $ | 38,966 | |||||
| NET INCOME (LOSS) PER SHARE: | |||||||||||||||
| Basic | $ | (0.27 | ) | $ | 0.51 | $ | (0.32 | ) | $ | 1.18 | |||||
| Diluted | $ | (0.27 | ) | $ | 0.47 | $ | (0.32 | ) | $ | 1.08 | |||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||||||||||
| Basic | 37,879 | 33,137 | 37,026 | 33,061 | |||||||||||
| Diluted | 37,879 | 36,708 | 37,026 | 36,696 | |||||||||||
| (1) Interest Expense: | |||||||||||||||
| Interest on bank debt | $ | 2,779 | $ | 2,055 | $ | 5,584 | $ | 4,310 | |||||||
| Other interest | 547 | 462 | 1,275 | 894 | |||||||||||
| Amortization: | |||||||||||||||
| Amortization of debt issuance costs | 409 | 1,024 | 813 | 2,236 | |||||||||||
| Total amortization | 409 | 1,024 | 813 | 2,236 | |||||||||||
| Total interest expense | $ | 3,735 | $ | 3,541 | $ | 7,672 | $ | 7,440 | |||||||
| Hallador Energy Company Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) | |||||||
| Six Months Ended June 30, | |||||||
| 2024 | 2023 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
| Net income (loss) | $ | (11,900 | ) | $ | 38,966 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Deferred income tax (benefit) | (3,621 | ) | 4,430 | ||||
| Equity loss – Sunrise Energy | 506 | 148 | |||||
| Cash distribution - Sunrise Energy | — | 625 | |||||
| Depreciation, depletion, and amortization | 29,092 | 35,145 | |||||
| Loss on extinguishment of debt | 2,790 | — | |||||
| Loss (gain) on sale of assets | (246 | ) | 58 | ||||
| Amortization of debt issuance costs | 813 | 2,236 | |||||
| Asset retirement obligations accretion | 798 | 912 | |||||
| Cash paid on asset retirement obligation reclamation | (602 | ) | (931 | ) | |||
| Stock-based compensation | 2,247 | 2,001 | |||||
| Amortization of contract asset and contract liabilities | (24,868 | ) | (22,162 | ) | |||
| Other | 1,402 | 704 | |||||
| Change in operating assets and liabilities: | |||||||
| Accounts receivable | 839 | 8,461 | |||||
| Inventory | (9,520 | ) | (9,322 | ) | |||
| Parts and supplies | (582 | ) | (5,564 | ) | |||
| Prepaid expenses | 2,140 | 282 | |||||
| Accounts payable and accrued liabilities | (11,107 | ) | (11,867 | ) | |||
| Deferred revenue | 61,710 | 121 | |||||
| Net cash provided by operating activities | 39,891 | 44,243 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
| Capital expenditures | (28,044 | ) | (30,610 | ) | |||
| Proceeds from sale of equipment | 2,474 | 62 | |||||
| Net cash used in investing activities | (25,570 | ) | (30,548 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
| Payments on bank debt | (86,500 | ) | (37,013 | ) | |||
| Borrowings of bank debt | 40,500 | 26,000 | |||||
| Payments on lease financing | (2,665 | ) | — | ||||
| Proceeds from sale and leaseback arrangement | 3,783 | — | |||||
| Issuance of related party notes payable | 5,000 | — | |||||
| Payments on related party notes payable | (5,000 | ) | — | ||||
| Debt issuance costs | (76 | ) | (1,629 | ) | |||
| ATM offering | 34,515 | — | |||||
| Taxes paid on vesting of RSUs | (273 | ) | (1,109 | ) | |||
| Net cash used in financing activities | (10,716 | ) | (13,751 | ) | |||
| Increase (decrease) in cash, cash equivalents, and restricted cash | 3,605 | (56 | ) | ||||
| Cash, cash equivalents, and restricted cash, beginning of period | 7,123 | 6,426 | |||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 10,728 | $ | 6,370 | |||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH: | |||||||
| Cash and cash equivalents | $ | 6,446 | $ | 2,337 | |||
| Restricted cash | 4,282 | 4,033 | |||||
| $ | 10,728 | $ | 6,370 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | |||||||
| Cash paid for interest | $ | 6,312 | $ | 5,010 | |||
| SUPPLEMENTAL NON-CASH FLOW INFORMATION: | |||||||
| Change in capital expenditures included in accounts payable and prepaid expense | $ | (1,694 | ) | $ | 426 | ||
| Stock issued on redemption of convertible notes and interest | $ | 22,993 | $ | — | |||
About Hallador Energy Company
Hallador Energy Company (NASDAQ:HNRG) is a vertically-integrated Independent Power Producer (IPP) based in Terre Haute, Indiana. The Company has two core businesses: Hallador Power Company, LLC, which produces electricity and capacity at its one Gigawatt (GW) Merom Generating Station, and Sunrise Coal, LLC, which produces and supplies fuel to the Merom Generating Station and other companies. To learn more about Hallador, visit the Company's website at www.halladorenergy.com.
Company Contact
Marjorie Hargrave
Chief Financial Officer
(303) 917-0777
[email protected]
Investor Relations Contact
Sean Mansouri, CFA
Elevate IR
(720) 330-2829
[email protected]
