Massey Energy Company April 2007

Transcription

1 Massey Energy Company April 2007 Eric Tolbert/Vice President & Chief Financial Officer Roger Williams/Vice President, Sales 1

2 Safe Harbor Statement FORWARD-LOOKING STATEMENTS: certain statements in this presentation are forward-looking as defined by the Private Securities Litigation Reform Act of Due to known and unknown risks, the company s actual results may differ materially from its expectations or projections. Factors potentially contributing to such differences are described in further detail at the conclusion of this presentation and in the company s annual reports on form 10-K and quarterly reports on form 10-Q. 2

3 Massey Energy Company A leading provider of highquality steam (utility and industrial) and metallurgical coal in Central Appalachia 3

4 Massey s competitive advantage is based on our market-leading reserve base ,273 M illions of T ons Note: 90 million tons of Massey reserves are located outside of Central Appalachia 4

5 Our reserves represent an estimated one-third of total Central Appalachia reserves (Central Appalachia Reserve Tons In Billions) MEE Non-MEE Source: Energy Venture Analysis, Inc., Company estimates 5

6 Massey has a diversity of product to meet customer needs Reserves as of 12/31/06 (tons) + 1% Sulfur - 1% Sulfur Compliance Total 861 mil. 1,412 mil. 970 mil. 2,273 mil. 38% 62% 43% 100% 2006 Produced Tons Sold Utility 71% Industrial 9% Metallurgical 20% 6

7 Massey s long-term production growth due to organic expansion and opportunistic acquisitions 50 (million tons)

8 Massey s Central Appalachian coal is geographically advantaged In 2006, Massey s steam coal customers were focused in the Southeastern and Mid- Atlantic states Central Appalachia enjoys tremendous transportation advantages in these markets, especially in the Southeast 8

9 A Leading Central Appalachian Presence Massey Energy Properties 9

10 Massey maintains low legacy liabilities Legacy Liabilities as a Percentage of Net Worth* Competitors: Massey * Net worth defined as shareholders equity less intangibles Source: Company reports 10

11 Massey s significant margin advantage Over the long-term, Massey is expected to record higher per ton margins due to our cost advantage and a higher % of metallurgical production Cost advantage: Metallurgical production advantage: Premium reserves Lower royalties Best practices Equipment/infrastructure Lower legacy liability expense 20% of total production vs. competitor average of 9% 11

12 Massey will enhance long-term shareholder value Massey s asset base provides a significant cost advantage vs. our Central Appalachian competitors - and it will increase as competitors reserves are depleted This accelerating cost advantage translates into shareholder value not reflected in current earnings 12

13 Massey sold position as of 1/25/2007 (millions of tons)

14 Massey s challenges Labor shortage/turnover Mining costs Cost of regulatory compliance Transportation issues 14

15 Productivity challenges Turnover Turnover* Productivity* Productivity * Footnote: *Turnover - voluntary turnover only. *Productivity - feet of advance per shift for underground mines. 15

16 Why Massey? Foremost producer in Central Appalachia with twice the market share of nearest competitor Premier reserve base provides long-term organic growth opportunities Diversity of supply matches domestic and international growth opportunities Operations can leverage infrastructure with minimal growth capital requirements Low cost producer Massey s strong balance sheet and low legacy liabilities provide a solid financial foundation and supports liquidity 16

17 Disclaimer FORWARD-LOOKING STATEMENTS: certain statements in this presentation are forward-looking as defined by the private securities litigation reform act of Such forward-looking statements are based on facts and conditions as they exist at the time such statements are made as well as predictions as to future facts and conditions the accurate prediction of which may be difficult and involve the assessment of events beyond the company s control. Caution must be exercised in relying on forward-looking statements. Due to known and unknown risks, the company s actual results may differ materially from its expectations or projections. Factors potentially contributing to such differences include, among others: market demand for coal, electricity and steel which could adversely affect the company s operating results and cash flows; Future economic or capital market conditions; Deregulation of the electric utility industry; Competition in coal markets; Inherent risks of coal mining beyond the company s control, including weather and geologic conditions; The company s ability to expand mining capacity; The company s production capabilities; The company s plan and objectives for future operations and expansion or consolidation; Failure to receive anticipated new contracts; Customer cancellations of, or breaches to, existing contracts; Customer delays or defaults in making payments; The company s ability to manage production costs; The company s ability to timely obtain necessary supplies and equipment; The company s ability to attract, train and retain a skilled workforce; Fluctuations in the demand for, price and availability of, coal due to labor and transportation costs and disruptions, governmental policies and regulatory actions, legal and administrative proceedings, settlements, investigations and claims, foreign currency changes and other factors; And greater than expected environmental and safety regulation, costs and liabilities. The forwardlooking statements are also based on various operating assumptions regarding, among other things, overhead costs and employment levels that may not be realized. While most risks affect only future costs or revenues anticipated by the company, some risks might relate to accruals that have already been reflected in earnings. The company s failure to receive payments of accrued amounts could result in a charge against future earnings. Information concerning those factors is available in the company s annual reports on form 10-K and quarterly reports on form 10-Q. Included in this presentation is the non-gaap measure, Average cash cost per ton. Average cash cost per ton is calculated as the sum of Cost of produced coal revenue and Selling, general and administrative expense (excluding Depreciation, depletion and amortization), divided by the number of produced tons sold. Although Average cash cost per ton is not a measure of performance calculated in accordance with GAAP, management believes that it is useful to investors in evaluating Massey because it is widely used in the coal industry as a measure to evaluate a company s control over its cash costs. Average cash cost per ton should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP. In addition, because Average cash cost per ton is not calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies. A reconciliation of Average cash cost per ton can be found in the company s Form 10-K for the year ended December 31,

18 Doing the Right Thing with Energy Chairman, CEO and President 18