To understand when $BTU is likely to perform, you probably should understand WHY it has declined significantly and when those drivers are likely to cease or even turn around. This is a commodity producer and when investors, rightly or wrongly, aren’t inclined to give you much or ANY terminal value, having the market fall apart is a problem.

Here is the most important global gas benchmark, TTF gas.

6 months...

$BTU

When I am bullish on this name and coal generally, you will know

No one wants to come out swinging more than me, but for now there just isn’t much to do. It’s in no mans land

Doesn’t mean anyone needs to sell, but there aren’t near term bullish catalysts A robust cap returns program could have been the perfect antidote to a weak share price and a weak market

Instead, management chose the most anemic program possible

Important to update your view as new datapoints arrive and my conclusion is they 100% deserve their reptuation

Guys, even if a default doesn’t occur, there still could be a move to catch here.

This is NOT the GOP of 2011 / 2013, McCarthy is one of the weakest speakers in American history - one member of House Freedom can endanger his speakership if they want to Biden had to cancel int’l trip last minute - big embarrassment - huge blow to Papua New Guinea and PM of Australia, read more below if you want to - doesn’t put him in the mood to compromise. And he already got flak for work requirement from left

newyorker.com/news/letter-fr…

30 min from landing London so banging this out before wifi cuts, but initial $BTU takes:

1) impressive EBITDA in a bad px environment - shows the strength of the platform and value here

2) TOTALLY NUTS mgmt voluntarily boxes themselves into just $159M after going lite dividends For those who have asked - not advice or recommendation for you - I am voting all shares against current board renominations, etc at upcoming AGM. Think many others are like-minded and this could be a forum to begin making some headway on the culture problems at BTU

Less worried about $BTU than I have been in a long time

Frequently get DMs asking about books / resources new investors can use to get up to speed on coal, and the short answer is that there isn’t anything not stale because the sector is niche (same reason VanEck delisted $KOL) I prefer $BTU for reasons I have listed ad nauseam, but at a high level, what you need to know is that most of these companies will generate their market caps in free cash flow in 2-3 years.

And coal is going to be around A LOT longer than 3 years. That’s it. That’s the trade.

There is enough lunacy and misery on Twitter these days, and I know this may come across as totally insane…
 
…but what moves would you make now if you thought China was going to make a move on Taiwan at some point in the next 18 months?
 
1/ I think serious traders need to actually engage with this because the portfolio implications could be dramatic, so not trying to have an armchair discussion for fun.
 
2/

Not concerned about $BTU intraday - wouldn’t overanalyze surety collateral, in cap return environment soon and that is what matters.

But to my point on needed management changes, I think a lot of holders decided they were done with this name last six weeks and would sell the rip Regardless of substance. Can’t say I blame them…new c suite and stock would probably rip 10-15%, maybe more.

Stock likely seasons well into earnings, how FCF is used is defined formulaically and should provide comfort to those still worried about mgmt, not a concern for me

$BTU PR speaks for itself

65% of excess FCF MINIMUM

notice that taking out the convert captured in ‘potentially dilutive securities’, so 65% is FLOOR, not ceiling

Will share a fuller update at some point, but here’s how I’m approaching go forward

bamsec.com/filing/1064728… As many know, I’ve traded around $BTU, but unless the stock gets really carried away, like $40 in the next few months, I’m probably done trying to get too cute optimizing P&L. No idea what the future holds, but next time we hit $30, I don’t think we meltdown into the low $20s…

Interesting that that $BTU is the #1 performing coal equity YTD, you wouldn’t know it from Twitter sentiment.
 
1/5 Look at that outperformance vs WHC, which has a robust buyback, while $BTU has none (though soon, it will).
 
If you blinded the labels, I would have guessed $WHC.AX had no buyback and had an insider trimming. Maybe Twitter sentiment is wrong?
 
2/5

Everyone loved $BTU at $31 only LAST MONTH.
 
35 days later, many of the same accounts that were uber bullish then are bearish now.
 
Let’s review whether it makes sense to be bearish after a 30 pct correction.
 
Are folks as wrong now as they were last month?
 
1/n By Friday, we may see an 8-K on a $BTU surety deal.
 
And the JPM collar is 4065, which acts as a 🧲
 
Doesn’t seem like a terrible setup for $BTU headed into April, one of the strongest seasonal months of the year
 

https://twitter.com/eliant_capital/status/1640144588848472066?s=61&t=V2vyGsWloYxOPiZAQYz6ZQ

 
2/n

$BTU Q4 ‘22 earnings are out pre-market tomorrow. What can we expect?
 
Time for a full check-in 🧵
 
1/ Everyone is worried about the decline in Newcastle, so let’s review what it means for BTU
 
See below, BTU hasn’t sold NEWC tons at spot all year
 
But tomorrow will be the first results in which they did. NEWC averaged $379.47 in Q4 vs BTU’s Q1-Q3 ASP sub-$122. Interesting
 
2/

Few notable updates on $BTU technicals, positioning and cap return catalysts based on several datapoints
 
There was more bullish options flow on $BTU overnight, a 30/34c 2-24-23 bull call spread (h/t @amazonholder1 )
 
1/ You really can’t ignore stuff like this, there have been several of these trades and someone may know something.
 
2/

2 things. Some of you are worried about $BTU coinciding with CPI release. Maybe you shouldn’t be.

Earnings beat plus equity rip off of CPI might be the cocktail that gives us escape velocity to a higher plateau.

Listen to the Cat.

https://twitter.com/inartecarlodoss/status/1623621945349574657?s=61&t=65vBHJxHbJ9YpL_oauuk0w

Second, the sentiment on $BTU and coal is about as bad as when I first initiated on it in September. All the bears have come back out, which is super encouraging to see. Like clockwork, every time this happens, it’s been a great time to buy.

Quick comparison

$CEIX mkt cap - $1.93B

12/31/22A cash: $273M (14% of mkt. cap)
3/31/23E cash: ~$400M (21% of mkt. cap)

$BTU mkt cap - $3.7B

9/30/22A cash: $1.399B (38% of mkt cap)
12/31/22E cash: $2.043B (55% of mkt cap)
3/31/23E cash (in 50 days): $2.542B (69% of mkt cap) $BTU capital returns in both yield and size of buyback are likely to significantly outweigh what $CEIX does.

$BTU also has a met segment that run rates at $700M-$1B of EBITDA at current spot, so it’s not a thermal pure play and not really exposed to gas market dynamics because

I’ve shared plenty of bullish takes on $BTU – maybe too many! – so let’s review the key risks, as I see them. Now is an opportune time to consider them since $BTU has been relatively rangebound.
 
Every investment carries risks and, of course, $BTU is not an exception.
 
1/n The biggest risk, by a long shot, is the supply situation in the gas market.
 
The glut is global in nature and it stands to get worse over the next three months.
 
2/n

Not concerned by $BTU price action. Notice how every time we retrace to $27, the dip is bought quickly.

$BTU in my view has a far superior setup and the equity is likely to front run earnings on 2/14 similar to how $CEIX was strong into today. Personally, I am exited to see Elliott sunsetting. They have been in this name since 2016 and 6.5 years is FAR beyond their typical holding period.

From the standpoint of equity holders, Elliott leaving stands to be a positive. An activist would have entered the stock…

2 separate but positive overnight developments for $BTU
 
First, $CEIX earnings. They crushed GAAP EPS estimates by 63% and handily beat revenue as well (see image).
 
1/n The stock is up about 5% premarket. It’s relatively illiquid so wouldn’t be surprised to see the rally gather steam post open.
 
2/n

Participants are clearly nervous about coal, in light of a mild European winter, so far, and weakness in the gas market.
 
This creates an interesting setup for $BTU fourth quarter results that are soon to be reported (date should be announced this week)
 
1/n $BTU 3Q earnings were plagued by poor execution. I certainly wasn’t impressed.
 
Logistical and weather challenges lead to lower-than-guided volumes in all 4 segments.
 
Rain at Wilpinjong + Wambo was 2x the historical ten-yr average and both mines had COVID absenteeism.
 
2/n

Roadmap for the $BTU trade for the rest of the year at a higher level:

Q4 ’22 (reported in maybe 10-15 days) will be great, no concerns as articulated repeatedly

Any pop from Q4 earnings likely to be sustained given rapid progress towards capital returns rest of Feb / March Q1 ’23 in April, once again, will be really good. It’s essentially in the bag, more tons priced at $84 and low/mid $100s NEWC will be rolling into full spot

Plus massive return of margin cash again given lower NEWC.

Launch of buyback / dividends is watershed event, further

As you comp $BTU to peers, remember:

#1 Global thermal peers ran much harder last year and were much more heavily accumulated, well past ATHs.

If there is any mean reversion, even if temporary, the peers are flying much closer to the sun than BTU, the old dog no one wanted This is only is part of the reason why I think the decline in $CEIX yesterday was much sharper than $BTU.

If anything, $BTU ’s mean reversion is to the upside, not the downside, both on technicals and fundamentals

$BTU

Management’s current view of themselves is that they are doing a good job and that any fears investors may have previously held — “they’ll totally do an acquisition / waste cash on this or that” — were put to rest in the investor day. However, if you think communications / IR has room to improve – that $BTU still has a perception problem, that clearer, more explicit, and ideally $WHC.AX written-in-stone FORMULAIC guidance for how cash will be returned to investors is needed,  you need to let them know.