Patriot Beats Low Expectations (PCX, BTU, ACI, CNX)

Patriot Coal Corp. (NYSE:PCX) reported fourth quarter and full year numbers this morning. Patriot’s report follows the trail blazed earlier this year by Peabody Energy Corp. and Arch Coal Inc. (NYSE:ACI) and CONSOL Energy Inc. (NYSE:CNX).

For the quarter, the company made revenue of $541 million with net income of $65.2 million and EPS of $0.85. For the year, Patriot reported revenue of $1.7 billion and net income of $146.9 million (EPS of $2.28). Analysts had been expecting a quarterly EPS loss of -$0.70 on revenue of $498.7 million.

The company’s EBITDA for the quarter was -$11.8 million, reflecting production problems and costs associated with closing some of its mines. An accounting rule related to shipments of below-market sales from mines acquired when Patriot purchased Magnum coal reduced the company’s operating costs and expenses by $127.7 million for the quarter.

Operating costs were higher in the fourth quarter than the full-year average, but quarterly production year-over-year nearly doubled. Patriot expects to sell 36-38 million tons of coal in 2009 in a price range of $56-$59/ton for Appalachian coal and $35-$37/ton for Illinois Basin coal.

Patriot noted that utilization of US steel mills dropped from 83% to 44% during the 2008 fourth quarter, reducing demand for metallurgical coal. Thermal coal shipments to northern Europe have also fallen 45%, causing prices for thermal coal to fall by 50% since the beginning of the fourth quarter.

US coal stockpiles are also growing, but Patriot believes that “mine closures in 2009 should accelerate the return to market equilibrium.” That’s something of a mixed blessing in the current economy.

Paul Ausick