UPDATE 3-Peabody reviews high-cost coal mines as prices stay weak

Thu Apr 24, 2014 1:21pm EDT

* Expects 2nd-quarter adj loss $0.14-$0.39/share vs est. $0.20

* First-quarter adj loss $0.19/share vs est. $0.0

* First-quarter revenue down 7 pct at $1.63 bln

* Shares reverse course and gain 2.4 pct (Adds conference call details, analyst comments; updates share movement)

By Swetha Gopinath

April 24 (Reuters) - Coal miner Peabody Energy Corp said it was reviewing a couple of higher-cost operations in Australia as prices for steelmaking coal remain dismally low.

Peabody's shares reversed course to trade up 2.4 percent at $17.83. They fell as much as 3 percent in early trading after the company posted a much bigger-than-expected quarterly loss.

"We are having some pretty serious looks at couple of operations," Peabody Chief Executive Gregory Boyce said on a conference call in response to a question about the company closing some of its metallurgical coal operations.

Paltry demand and excess global supplies have weighed on prices for steel making, or metallurgical coal, prompting companies to rein in costs by shuttering mines.

Peabody, which sold a coal deposit in Queensland, Australia for A$70 million ($65 million) in the first quarter, said it was looking at selling other non-core assets.

Walter Energy Inc said last week it would idle its Canadian mines and temporarily lay off about 700 employees.

"We expect investors to be relieved by (Peabody's) ability to continue to navigate the low price environment relatively well," Brean Capital analyst Lucas Pipes wrote in a note.

Peabody also cut its 2014 capital expenditure target to $250-$295 million from $275-$325 million.

The company warned that its second-quarter loss could likely be higher-than-expected due to the weak prices.

The metallurgical coal price benchmark for hard coking coal settled at $120 per tonne in the second quarter, $23 lower than the first-quarter settlement, Peabody said.

"The guidance for a significant step down seems reasonable considering the significantly lower benchmark met and thermal prices that will be realized in the quarter," Simmons & Co analysts wrote in a note to clients.

Peabody said it expected to report an adjusted loss of 14-39 cents per share for the second quarter. The midpoint of that range is above the average analyst estimate for a loss of 20 cents per share, according to Thomson Reuters I/B/E/S.

THERMAL COAL RECOVERY

Peabody and rivals such as Arch Coal Inc and Alpha Natural Resources Inc are expecting a recovery in demand for thermal coal, used in power generation.

Power producers are slowly reverting to coal after the recent ramp-up in natural gas prices. A particularly cold winter in the United States has heightened power demand.

Peabody said it expected revenue per ton from the United States to fall at a more moderate rate of 4-7 percent this year, compared with its previous expectation of a 5-8 percent decline.

Net loss attributable to Peabody shareholders more than doubled to $48.5 million, or 18 cents per share in the first quarter.

Adjusted loss was 19 cents per share, much higher than the average analyst estimate of a loss of 1 cent per share.

Revenue fell about 7 percent to $1.63 billion, slightly missing the average analyst estimate of $1.68 billion.

($1 = 1.0766 Australian Dollars) (Reporting by Swetha Gopinath in Bangalore; Editing by Don Sebastian and Maju Samuel)

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