Good day, and welcome to the Peabody First Quarter 2024 Earnings Call. I would now like to turn the conference over to Karla Kimrey. Please go ahead.

Good morning, and thanks for joining Peabody Energy call for the First Quarter of 2024. With me today are President and CEO, Jim Grech, CFO Mark Spurbeck, and our Chief Marketing Officer, Malcolm Roberts. Within the earnings release, you will find our statement on forward-looking information as well as a reconciliation of non-GAAP financial measures. We encourage you to consider the risk factors referenced there, along with our public filings with the SEC. Now I'll turn the call over to Jim.

Thanks, Karla, and good morning, everyone. First quarter operational results were highlighted by a number of challenges and successes. There were unforeseen production challenges in Australia that are now behind us. While thermal coal shipments in the U.S. were impacted by unseasonably warm winter weather and low natural gas prices. Within our Seaborne Met segment, Shoal Creek continues to exceed production expectations, although shipments have been hampered by the failure of the Demopolis lock. We continue to strategically invest in our portfolio through the development of Centurion and completed the acquisition of the adjacent Wards Well coal deposit, which extends the mine life to over 25 years. Before I expand on the markets, I want to thank our global employees for their continued focus and commitment to working safely and efficiently. Now turning to the global coal markets. Seaborne Thermal coal markets traded within a tighter range for the first quarter. The normal winter and low natural gas prices have continued to weigh on demand for thermal coal, coupled with a steady supply from the East Coast of Australia, resulting in Newcastle coal trading within a range of $120 to $135 per ton. Asian thermal coal imports are expected to remain robust, with China continuing to show increases in electricity demand with first quarter Seaborne Thermal coal imports estimated at a year-over-year increase of approximately 15%. Within the Seaborne Metallurgical coal market, coking coal prices declined during the quarter. Metallurgical coal demand was hampered by a thin steel margin globally, except for India, where robust economic output supported steelmaking profitability. PCI prices also were treated during the quarter. However, not to the extent of higher quality coking coals. During April, we have seen improving steel margins and seasonal restocking finding pricing support for metallurgical coal markets. In the United States, electricity generation for the first quarter of 2024 proved to be particularly challenging with a warm winter and significantly lower gas prices resulting in coal share electricity generation nationally declining to approximately 15% during the first quarter. With that said, coal continues to be a critical component of the country's energy generation when looked at regionally in the US. As an example, coal power was relied upon and accounted for over 40% of generation in the MISO and SPP regions in various instances in January 2024 again, proving the importance of coal for a reliable grid. Now moving on to our operating segments. The Seaborne Thermal segments had higher volumes than anticipated, with additional warping on volumes going to the domestic market as a carryover from the train derailment on the mainline in December. Average realized prices and costs per ton were lower than anticipated due to higher production at Wilpinjong, where we opportunistically mined some lower-grade coal which we do when the market supports it. The higher production at Wilpinjong was offset by an extended longwall ramp-up at Wambo. Looking forward, we expect a higher proportion of Newcastle specification coal due to increased production from the Wambo complex. The Seaborne Met segment shipments were in line with expectations. Volumes are lower than ratable for the year due to an anticipated longwall move at Metropolitan and mine sequencing at the CMJV. Segment cost per ton were at the high end of our range, impacted by an unplanned Coppabella dragline outage and the acceleration of planned coal prep plant repairs at the CMJV, partially offset by higher production at Shoal Creek. Our sales mix was impacted due to mining some lower quality coal at CMJV due to mine sequencing. As we look forward to the full year, our sales mix should improve with additional sales in Shoal Creek through the anticipated opening of the Demopolis Block. In the PRB shipments were lower than expected as a result of an unseasonably warm winter and prompt natural gas prices that averaged $2.10. Segment cost per ton came in higher than expected due to lower volumes, but were somewhat offset by rationalization of discretionary cost spend. Although PRB demand for the quarter was challenged, we are contracted to 85 million tons for the year. Our full year guidance assumes a normal summer and fall with customers meeting our commitments. Our customers have different demands or needs. We will work with them to be responsive while still retaining the full value of our contracts. In other U.S. thermal, shipments were below expectations as we had a few customers reduce their shipments due to high inventories and low natural gas pricing. Segment margins were higher than anticipated due to favorable sales realization, which included some sales contract cancellation settlements. Even with the current market conditions, our exceptional sales team was able to book some new business. So, our price volumes for the year did not change. Outside of our active operations, we continue to make progress at the Centurion mine, our key metallurgical coal growth projects. We've had some delays in the delivery dates of some mining equipment from the manufacturer, but expect development in coal to occur in the second quarter. As previously announced, we closed a Wards Well transaction last month. We're currently developing an integrated mine plan and we'll discuss it more fully in the future. The recruitment of the initial Centurion mine development workforce is complete even though labor remains tight in the mining industry in Australia. We continue to expect the first longwall coal in early 2026 and capital expenditures remain in line with previous guidance. We are pleased to announce that for the first time in nearly 12 years, we are mining at our Lee Ranch mine in New Mexico. In 2022, we secured a new long-term contract which extended the life of our New Mexico operation and supported the transition from El Segundo back to Lee Ranch. In summary, we have had some challenges this quarter. But as we look out to the full year, our operations and sales have us well-positioned. We completed two longwall moves in Australia, coal quality is improving, and our production plans give us confidence in reaffirming our full year guidance. I'll now turn it over to Mark to cover the financial details.

Thanks Jim. In the first quarter, we recorded net income attributable to common stockholders of $40 million or $0.29 per diluted share and adjusted EBITDA of $161 million. Included in these results was an estimated $18 million non-cash remeasurement charge from the weaker Australian dollar. The company generated $120 million of operating cash flow and had $61 million of capital expenditures with more than half of it dedicated to Centurion. During the quarter, we continued to execute on our shareholder return program and repurchased 3.2 million shares or 3% of shares outstanding. Under the existing $1 billion share repurchase program, we have $570 million of remaining share repurchase authorization. The company ended the quarter with $856 million of cash, fully funded reclamation accounts and the new $320 million revolving credit facility. Turning now to the first quarter segment results. Seaborne Thermal recorded $94 million of adjusted EBITDA. First quarter shipments were 100,000 tons more than anticipated and higher Wilpinjong production offset lower production at Wambo. For lower cost Wilpinjong production was offset by lower realized prices, resulting in EBITDA margins of 33%, in line with the previous quarter. The Seaborne Metallurgical segment generated $48 million of adjusted EBITDA. Average realized pricing was less than anticipated due to mining lower quality coking at the CMJV. PCI coal prices remained weak relative to premium hard coking coal. Costs of $139 per ton were at the higher end of guidance due to unplanned equipment and wash plant repair costs at the CMJV. The U.S. thermal mines produced $63 million of adjusted EBITDA in the quarter and lower than expected shipments that Jim previously mentioned. The PRB mines shipped 18.7 million tons and generated $16 million of adjusted EBITDA. Cost came in at $12.74 per ton higher than expected due to lower production costs. The other U.S. thermal segment generated adjusted EBITDA of $47 million. We shipped 3.2 million tons, about 400,000 tons less than anticipated, but also benefited from contract cancellation settlements, which increased revenue and EBITDA margins above fourth quarter levels. Looking ahead to the second quarter, Seaborne Thermal volumes are expected to increase to 4.1 million tons, including 2.7 million export tons with higher volumes out of the Wambo complex. 400,000 export tons were priced on average at $146 per ton, with 1.3 million tons of high ash product and 1 million tons of Newcastle specification product unpriced. Costs are expected to remain consistent with the prior quarter at $45 to $50 per ton. Seaborne Metallurgical volumes are expected to be 1.9 million tons, 500,000 tons higher than the first quarter as the Metropolitan longwall move is now complete and mine sequencing improves at the CMJV. Volumes are expected to achieve 65% to 70% of the premium hard coking coal price, based on the projected sales mix and current price relativities. With higher production, costs are anticipated to improve to $110 to $120 per ton in line with full year guidance. PRB shipments are expected to be 15.5 million tons lower than ratable as we enter the traditional second quarter shoulder season. Costs will be temporarily elevated at $12.75 to $13.75 per ton due to lower shipments and resulting higher strip ratio. Other U.S. thermal coal shipments of 3.8 million tons are expected to be higher than the prior quarter, as we recently signed new contracts for 1.8 million tons to be delivered this year. We expect costs of $44 to $48 per ton in the quarter. Additionally, in the second quarter, we have the $134 million cash purchase of Wards Well and are expecting tax payments of nearly $120 million in Australia, covering the remaining 2023 liability in the first half of 2024 estimated payments. With an implied stronger second quarter, we are reaffirming full year guidance. We expect to generate significant cash flow in the second half of the year and remain committed to returning capital to shareholders. Strategically, we continue to take steps to deliver long-term value. We closed the Wards Well acquisition in April and continued development at Centurion. We expect first continuous minor development coal this quarter and are on track to commence longwall operations in the first quarter of 2026 on-time and on-budget.

Thank you. We will now begin the question-and-answer session. Our first question comes from Lucas Pipes from B. Riley Securities. Please go ahead.

Mark I want to start with a few questions on the finance side. You noted the U.S. Reclamation bond release of $105 million. And I wondered if you could maybe walk us through the cash flow implications of that release, if any? And then just around cash flows in Q1, I'd anticipate something similar in Q2 with the Wards Well acquisition closing. Could you speak to any other kind of cash flow impact in Q2 be it working capital or otherwise? And then just with that lumpiness how do you think about staying in the market from a buyback perspective? Do you have the flexibility to be opportunistic? Or do you kind of pause it here and then resume it in the second half is when you noted cash flow would be stronger again? Thank you very much.

Yes, Lucas, thank you for those questions. And I'll try to hit on all of them. And really good results with some bond reductions in the first quarter. Credit to our team here for, one, getting the reclamation work done; but two, also following up and getting those bonds released. On average those bonds are probably collateralized at about 55%. So, there was some cash returned. We also moved around from some other bonds in Australia. So, there was a cash inflow. So, you see a reduction in that restricted cash and cash collateral on the balance sheet. Offsetting that from a cash flow perspective, though, there was some use of working capital. So net-net, there are $120 million of operating cash flow is how you should look at that. You mentioned a little lumpy here with Q1 with the performance we turned in as expected. Q2 will be similar. We have the $134 million cash purchase at Wards Well, and I know you remarked the tax payments from Australia about $120 million. That makes up both the remaining liability from 2023 as well as first half of 2024 for estimated payments. So, a couple of significant cash usages here in the second quarter. But again, going out we've at the second half well positioned based on guidance and the forward price strip, you can see some pretty significant cash flow depending on your price deck, plus that $300 million to $400 million is an opportunity we have out in front of us from a cash flow perspective. Maybe lastly, just touching on the program, I'll note a couple of things. One, everything we do, including our repurchase term program is designed for long-term value and durability. Since we restarted the program, we've announced a return of just under $0.5 billion, $50 million in dividends and about $430 million in share buybacks through the repurchase program. We have essentially created 15% growth in earnings and free cash flow on a per share basis with that share reduction. We have completed the balance sheet initiatives we set out two or three years ago to do, which included one very important step that no one else has done, and that is pre-funding 100% of our global reclamation liability. This puts us in a leading position in the industry going forward, taking that big liability off the table and eliminating a big liquidity and capital risk going forward. So, we believe that puts us in a great position to continue developing our premium hard coking coal project in Centurion. And with our quarterly fixed cash dividend, the program's durability remains through periods of lower cash flow, but also very flexible to increase in periods of above-average free cash flow at the direction of our board. So lastly, I'd note, and I think you asked, are we going to be opportunistic or flexible? Yes, I think our program tends to be flexible. And as we look out in the full year, we see some strong cash flows going forward, and we have the flexibility in our program to look on things on an annual basis and get back in the market on an opportunistic basis when our board deems it appropriate. So, lots of flexibility, a lot of opportunity in front of us going forward, and we remain committed to returning additional capital to shareholders.

Mark, really appreciate that. I think you hit on all the points there. So, thank you for that. Jimmy, I want to get your perspective on a couple of regulatory things. First, EPA last week unveiled a new power plan rule. Could you maybe comment on what you think the impact is on your domestic business? And how you think from a strategic perspective you can mitigate any impact? And then over in Australia, there's, I think, a new labor rule coming that in regards to contractor pay. If you could maybe comment on that and what the impact might be in Australia? Would appreciate your thoughts on those two developments. Thank you.

On the first topic regarding the EPA and the new suite of rules related to the Clean Power Plan, I want to highlight that about seventy-five percent of our company's EBITDA is derived from our Seaborne Thermal and Met Segment. While we are concerned about these regulations, it's important to note that the majority of our EBITDA comes from our Seaborne platform. Regarding the implications for our domestic business, many of these regulations will take effect in the coming years, which means I don't expect to see any short-term impacts. We're still assessing any potential long-term effects. We have consistently expressed our belief in a diverse energy mix that includes both coal and renewables, providing reliable energy security and affordability. However, we feel that the EPA has exceeded its authority as granted by Congress, jeopardizing grid reliability at a time of rising energy demand. What's different this time is the significant surge in power demand projected over the next five years, particularly with the growth of electric vehicle manufacturing, data centers, and AI centers, which increases our load expectations. As a result, over twenty power plants have announced delays in their retirement plans. Looking at the US thermal market from this angle, it's actually growing. Additionally, there's a growing national awareness of the issues surrounding grid reliability and the need for sufficient baseload generation to handle this load growth. This has resulted in a strong opposition to the proposed EPA regulations from various stakeholders, including PERC, PJM, MISO, and electric utilities, some of whom have not been vocal in the past. Even politicians from both parties are now addressing their concerns, and major national newspapers have published articles about the importance of grid reliability. I believe this groundswell of opposition will lead to a swift and significant reaction in the US court system. More than twenty state attorneys general have announced their plans to challenge the proposed regulations, collaborating with the National Mining Association to support legal actions. We anticipate seeing court stays on these regulations later this year. To address your main question, I foresee no immediate impacts, but the substantial opposition may create uncertainty about the long-term consequences of these regulations on the US generation mix, especially given the continued extension of power plant operations due to rising load growth. For your second question regarding the new labor rules in Australia related to contractor pay, we have already incorporated these changes into our guidance. The rules will take effect on November 1st, and any impact will be reflected in our forecasts. However, since we do not rely heavily on contractors compared to other mining companies in Australia, any effect will be minimal and is already accounted for post-November 1st.

Thank you very much for that detailed answer on the EPA side. Very, very helpful. On the second part roughly what percentage of your Australian workforce consists of contractors, or labor costs? I guess a few ways to slice it. But I guess, if it starts November then we have 2 out of 12 months impact. So just trying to get a sense for what it could mean for next year on a full year basis?

I don't have that right in front of me, but we'll get it right back to you. When we'll get, we'll follow up with you on that one to give you the correct number on that.

The next question comes from Nathan Martin from Benchmark Company. Please go ahead.

To start off with Centurion, you guys still targeting development coal there sometime here in the second quarter it looks like. What's your plan and timing, I guess, as far as selling or marketing those tons is concerned?

Look, we've already started including contracts for the development coal coming out of Centurion. So, during the quarter a blue-chip North Asian customer agreed to a two-year contract and we look forward to making our first shipment later this year.

And Malcolm, are there any limitations there from a transportation standpoint at this point?

Absolutely no transport issues. We've been fully set up within the Goonyella system with contracts and the like to be able to ship that product.

And then maybe stick with transportation for a second. I think, Jim, you made some comments about the Demopolis lock outage. Just to be clear, what kind of impact are you still seeing there at Shoal Creek? Clearly, your second quarter net sales guidance is up quarter-over-quarter, but just a little more color there would be great.

I'll comment on the lock and then I'll turn it over to Malcolm to talk about the sales. The lock we've been saying we expect it to be back Nathan in service by the end of May and the engineers came out this morning and actually said I think it's going to be May 22nd. It'll be back in service so more than a week earlier than planned. So that's some good news that we have for us. Now in regards to your question about the impact on sales I'll let Malcolm comment on that.

We've been railing some product to the port at McDuffie. However, what this really means is that for the second half of the year we're going to be weighted probably two thirds of our annual volume from Shoal Creek to the second half of the year and one third for the first half as a result. But we really do forward that lock coming back and we're advised today the 22nd of May.

And maybe shifting over and I know I asked about this last quarter and I think you know Jim you clearly made some comments in your prepared remarks too. But the PRB shipment is below your first quarter target, second quarter guidance down 3 million tons plus or minus. Again, we know seasonally that's typical during the shoulder season. But would be great to kind of get your thoughts on what gives you confidence to maintain your full year guidance range at this point? I mean it looks to me like you will need to increase second half shipments by at least 12 million tons just to hit the low end of that range. So, it would be great to just get a little bit more thought around that piece. Thank you.

First off, the tonnage levels that we're looking at for the second and then particularly the third and fourth quarter are well within tonnage ranges that we shipped in the past. So as far as the quantity of coal and our ability to produce it, and I do believe the railroads are going to be able to move it as well, which is a key item in the third and fourth quarter. So logistically, operationally, we feel very good about that. Our sales book is strong and the indications we have from our customers is that right now we are expecting to have some normal pull in that third and fourth quarter on those tons. We've already seen an uptick in some nominations for May. It was a little stronger than we thought it was going to be and we're getting some early indications we could see that again in June. So, it looks like there's recovery starting to occur in the PRB and the indications we're getting from our customers at this time. Operationally and logistically, we feel again we feel that we are reaffirming that guidance for the full year.

And then maybe just one more. Mark to you. I don't want to leave you out. I know Lucas touched on this earlier. Some of the moving pieces on the cash side here in the second quarter that are expected. Your available free cash flow I think was actually negative at the end of the first quarter. How could this impact your ability to repurchase shares again here in the second quarter?

You're right. The table shows the minus four there off of Q1 and with the cash purchase for Wards Well and the cash tax payments, not expecting a robust number for Q2. But again, our program is designed to be flexible. It is on an annual basis. We're very happy with our liquidity position and we see some strong cash flows coming forward here in the second half of the year.

The next question comes from Katja Jancic from BMO Capital Markets. Please go ahead.

Maybe just staying a bit on the share buybacks. Is there any possibility that you could use some of the cash on the balance sheet since it's so strong for buybacks?

As I mentioned the program is based on an annual look and we have flexibility. As I mentioned with Nate, we feel comfortable with our liquidity and strong cash flows coming in the second half of the year. So, we are designed to be flexible and we haven't announced anything but we have that built in to do we deem appropriate and to be opportunistic as the market presents.

And maybe then on the Centurion. For the second half of this year, do you still expect to ship 150,000 tons as was previously anticipated? And looking ahead to next year, what potential contribution do you foresee from Centurion?

So this year we look to ship about 100,000 tons for the current year. And I think production next year on a development basis is probably in the 400,000 ton range. And as Malcolm mentioned we already have blue-chip Asian customers kind of knocking down our doors trying to contract some of that coal. So really set up strong.

Our next question is a follow-up from Lucas Pipes from B. Riley Securities. Please go ahead.

Thank you very much for taking my follow-up question. I'll start with a quick one. The high ash product could you remind us what pricing has been quarter-to-date for that API 5? And then where does Wilpinjong typically price as a percentage against that index? Thank you.

We got to put a 5% to 20% discount against the 5 API 5 index, which is the China Index which is a 5500 kcal and 22% ash product. We supply a higher product slightly higher than that. So that represents the discount we're going to.

And Shoal Creek in Q1 MSHA data was very helpful. Was very, very strong on. And so, I wondered if you could maybe comment on kind of the operational outlook from here. I assume there's maybe a little bit of a normalization, but would be helpful to hear how you think about operations at Shoal Creek for the remainder of the year? Thank you.

I think MSHA data had about 600,000 tons in Q1 which again is a very, very strong quarter for the mine. Very, very happy with what the team has done down there and show that new fit for purpose longwall that we had down there. It's really making a difference. But we do have a longwall move later in the year, we have miners' vacation and so on for maintenance and we didn't have all of those things occurring in the first quarter. So, to keep that pace up would be very challenging later in the year with all the things that we have. I just don't see it staying at that pace in the following quarter with the longwall moves and the miners' vacation that we have ahead of us.

There are no more questions in the queue. This concludes our question-and-answer session.

Thank you for joining us today. I want to extend my gratitude to our employees for staying committed to safety and for effectively implementing our various initiatives. I also appreciate our investors, customers, and vendors for your ongoing support. That wraps up our call. Thank you.

Conference has now concluded. And thank you for attending today's presentation.