Westmoreland Coal Is A Unique Opportunity

Summary

  • Westmoreland Coal's entry into the MLP space signals a new direction for the company.

  • The MLP is perfectly suited to Westmoreland Coal, and we should expect additional asset drop-downs.

  • Expect other coal companies to try to raise capital through all available methods if coal prices stay low.

  • Many coal companies could benefit from the MLP structure although none are currently as well-suited as Westmoreland for the transition.

  • Peabody Energy is the best potential candidate for MLP usage.

Westmoreland Coal (NASDAQ:WLB) is an almost forgotten player in a distinctly distressed industry. It's also uniquely positioned with a business model that offers significant benefits in the industry's current environment. Westmoreland's purchase of a controlling interest (77%) in Oxford Resource Partners (NYSE:OXF), a Master Limited Partnership (MLP), on October 16th is a game-changer for both companies. This deal, which should be finalized in 4Q14, may lead other coal producers to investigate similar transactions. No other coal miner is as well-positioned for entry into the MLP space, though.

 

Westmoreland primarily utilizes a mine-to-mouth business model. This model is centered on mines delivering fuel to nearby power plants. These plants are specifically designed to use the supplying mine's thermal coal. Some mines feed coal directly into a single customer's power plant via a conveyor belt. Other Westmoreland mines have multiple customers, with one power plant typically adjacent to the mine. Ten of Westmoreland's twelve mines fit into this business model.

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Nathan Yates

Forward View Consulting, 288 Crack Rock Road, Clintwood, VA 24228, USA

Nathan Yates has been fascinated by technology and finance since he was young. He was the kid devouring the business section of the newspaper (remember those?) while others read everything else. Nathan believes that the American economy is built from the bottom-up, meaning that small businesses and local nonprofits are the foundation of our nation's success. These organizations are the lifeblood of towns and cities across the U.S. Unfortunately, most consulting firms overlook companies or organizations that don't have eight-figure budgets. Nathan thought Forward View Consulting should be different. And we are. As Lead Consultant, Nathan works with each client to deliver only the best financial and/or website development services. Nathan's years of web design experience and his business degrees ensure that professional expertise is brought to each project. Our network of contacts can offer additional specialized guidance if needed. Before creating Forward View Consulting, Nathan worked for an independent equity research firm as a Research Associate covering the industrial and energy sectors. This work involved preparing quarterly 15-40 page reports on multi-billion dollar corporations along with timely analysis of M&A activity and industry-wide news. He also managed research distribution and the company's online presence. Nathan also spent a summer serving as a local financial adviser's Research Intern. Nathan earned a Bachelor's degree in Economics and Finance from Southern New Hampshire University, graduating summa cum laude. He then earned a Master's degree in Finance from Southern New Hampshire University, where he was named the Outstanding Student in his particular concentration. Now, Nathan is an adjunct professor teaching economics and finance for his alma mater. In his spare time, Nathan enjoys fishing, reading, time with family and serving as a volunteer webmaster for the Clintwood United Methodist Church.