Massey Energy Company

Transcription

1 Massey Energy Company Bear Stearns Commodities & Capital Goods Conference November 29, 2007

2 Massey Energy Company Baxter F. Phillips, Jr. Executive Vice President

3 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 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 s annual reports on form 10-K K and quarterly reports on form 10-Q. 3

4 Massey Energy Company The leading coal producer in Central Appalachia 92 years of uninterrupted business 2 billion tons of coal reserves 3 times that of nearest regional competitor Strong and growing market share 2 times that of nearest regional competitor Abundant growth opportunities 4

5 Recent Results 3Q 2007 Produced coal revenue of $521.9 million, up13% versus third quarter of 2006 Produced coal tons sold increased 10% Cash margin per ton increased 10% Metallurgical coal tons sold increased 23% Net income of $21.4 million EBITDA 1 of $96 million 5

6 Recent Results 9 mos 2007 Produced coal revenue of $1.56 billion, up 9% versus first nine months of 2006 Cash margin per ton increased 35% Metallurgical coal tons sold increased 14% Net income of $89 million EBITDA 1 of $334 million 6

7 A Time of Opportunity Massey has an extraordinary strategic opportunity for its shareholders heading into the next three years Industry in transition and full of opportunities Proven record of capitalizing on industry cycles Unprecedented existing competitive advantages Free cash flow and liquidity to invest in expansion 7

8 Steam Coal Market Outlook CAPP utility inventories 23% higher than typical* 4% CAPP production decline year-to to-date 2007 versus 2006 yet utility inventories have continued to increase* Scrubber installations projected to reduce demand for CAPP utility coal However, international market driving CAPP steam coal pricing * Source: Energy Ventures Analysis 8

9 Growth While Competitors Struggle Massey Production (mm tons) CAPP Non-Massey Production (mm tons) Historical Projected 150 Historical Projected E 2012E E 2012E Note: Projection based on Energy Ventures Analysis CAPP forecast and assumed Massey internal growth to 52 million tons by 2012 SOURCE: Energy Ventures Analysis 9

10 Voluntary Turnover vs. Productivity Employee Turnover % Productivity* H * Productivity measured as feet per shift for Massey underground mines. 10

11 Strong Metallurgical Coal Market Unprecedented growth in global steel demand 18.5 mm tons of potential new high vol. metallurgical coal demand planned in Atlantic Basin Limited Australia coal supply growth Weak U.S. dollar High ocean freight rates favor U.S. exports in Atlantic Basin 11

12 Massey s s Met. Coal Advantage Massey Revenue Split YTD Massey Market Share US High Vol. Met. Coal 30% Met 25% Massey Thermal Others 30% of Massey s s revenues from metallurgical coal Massey represents more than one-quarter of the U.S. high vol. metallurgical coal market 12

13 Forward Sales Position * (Tons Millions) Expected Production Priced Sales Commitments Unsold/Unpriced Unpriced Met Coal * As of October 25,

14 Central Appalachian Reserves 2,500 2,000 2,183 12/31/2006 Central Appalachian Reserves (mm tons) 1,500 1, Massey Magnum CONSOL* Alpha Arch Patriot Peabody** TECO Coal James River ICG Foundation * CONSOL pro forma for AMVEST acquisition ** Patriot reserves are as of 12/31/2005 SOURCE: Company financials and websites 14

15 50 Years of Reserves What does this mean for Massey Energy? Cost & margin advantage on current production Organic growth opportunities mm tons that can easily be put into production with relatively small capital investment Reserve control is the key to consolidate region and expand market share 15

16 Massey Reserve Strength 729 mm tons with mineability equal to or better than what we are mining today 400 mm tons underground with average clean tons/ft mm tons surface with yards/ton ratio

17 Platform for Growth Cash balance $337 million at September 30, 2007 Increase of $98 million versus December 31, 2006 Forward sales position Forward sales commitments essential to ensure sales volume and cash generation to fund expansion Pricing of 2008 and 2009 commitments will enable us to generate significant cash flow 17

18 Production Expansion and Cost Reduction Plans

19 Cost Reduction Projects Remove longwall miner from Aracoma Replace with continuous miner sections Increase total production from 0.9 million tons to 1.2 million tons annually Reduce cash costs at this mine by $25 per ton 19

20 Cost Reduction Projects Move Bucyrus Erie Electric Shovel Improve surface mine ratio by 20% Add 0.2 million tons of production Save $8 per ton on 1.0 million tons annually 20

21 Cost Reduction Projects Logan County Resource Group to add 8 th highwall miner 0.3 million tons of low-cost production annually Will operate in the previously idled North-South surface mine. 21

22 Expansion Knox Creek Adding two miner sections in Jawbone Seam Metallurgical quality coal for international markets Anticipate 0.5 million tons annual production Production planned to begin in

23 Expansion Sidney New slope into the Pond Creek seam High quality thermal coal Approximately 1.0 million tons annually Production expected to begin in the first quarter of

24 Expansion Delbarton Air shaft, portal and supply facilities being designed, permitted New continuous miner section adding 0.3 million tons annually beginning 4Q 2008 Additional 0.4 million tons in

25 Expansion Rawl Development of a new mine in the Pond Creek seam Low sulfur, mid quality metallurgical coal Estimated 0.4 million tons production annually Production to begin in second half of

26 Expansion Mammoth Major belt and loadout expansion Allows expansion of low-cost thermal production Reduced cash cost Increase of 1.5 million tons annualized production by

27 Expansion Guyandotte Energy Rehabilitation of Pocahontas 3 seam Recently received seal plan approval Normalized production to begin in early million tons of low vol met coal annually by

28 Expansion Boone County Two additional miner sections High quality metallurgical coal 0.9 million tons increased annualized production by

29 Expansion Plan Summary 8.0 million tons net additional annual production in 2010 versus 2007 Approximately 4.0 million tons metallurgical and 4.0 million tons of high quality thermal coal Lower average cash cost per ton than current production Expansion capital expenditures of $220 million in 2008 and $220 million in 2009 In addition to normal capital spending of approximately $240 million per year for maintenance and replenishment Increasing earnings power going forward 29

30 Recent News Massey and Essar New Partnership with Global and Domestic Opportunity Essar Plans for dramatic increase in steel production and energy generation Coal reserves in India Massey High quality met and steam coal in North America Mining and processing expertise to support overseas expansion Initial Project development of coal reserves and coal preparation plant to support new electric power plant in India Additional ventures on a project-by by-project basis 30

31 Massey Energy Company

32 Non-GAAP Reconciliation Note 1: This presentation contains the non-gaap measure EBITDA. "EBITDA" is defined as EBIT before deducting Depreciation, depletion, and amortization. "EBIT" is defined as Income before interest and taxes, which is a measure of performance calculated in accordance with generally accepted accounting principles. Although EBITDA is not a measure of performance calculated in accordance with generally accepted accounting principles, management believes that it is useful to an investor in evaluating Massey Energy because it is widely used in the coal industry as a measure to evaluate a company's operating performance before debt expense and as a measure of its cash flow. EBITDA does not purport to represent operating income, net income or cash generated by operating activities and should not be considered in isolation or as a substitute for measures of performance calculated in accordance with generally accepted accounting principles. In addition, because EBITDA is not calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies. The table below reconciles the generally accepted accounting principle measure of Income before interest and taxes to EBITDA. 3 months ended Septermber 30 9 months ended September Income before interest and taxes $35.3 $46.6 $151.0 $91.2 Depreciation, Depletion & Amortization EBITDA $96.2 $104.2 $334.3 $