Hallador Energy Company Reports Second Quarter 2024 Financial and Operating Results

- Q2 Total Revenue of $90.9 Million -
- Q2 Net Loss of $10.2 Million or $(0.27) Earnings per Share -
- Q2 Operating Cash Flow of $23.5 Million -
- Q2 Adjusted EBITDA loss of $(5.8) Million -

TERRE HAUTE, Ind., Aug. 06, 2024 (GLOBE NEWSWIRE) -- Hallador Energy Company (Nasdaq: HNRG) (“Hallador” or the “Company”), today reported its financial results for the second quarter ended June 30, 2024.

Brent Bilsland, President and Chief Executive Officer, stated, “We made progress during the quarter towards our strategic and deliberate path to transform Hallador and capture increased value as we advance our products and services up the value chain. Since acquiring the Merom Power Plant in 2022, we have expanded our offerings from fuel production to wholesale electricity sales, and we are now moving further up the chain to begin powering the industrial end user, including through a signed Memorandum of Understanding (MOU) with Hoosier and WIN REMC earlier this year. Since that time, we have carried out a data center targeted Request for Proposal (RFP) that has received a robust response and is in active negotiations, further strengthening our conviction that power is in critical demand and that we possess a crucial component to the success of these data centers.”

“In the near term, we are facing a challenging market for spot electricity sales. Record natural gas production last year, combined with the second warmest winter in 25 years, has led to a surplus in natural gas inventory. This imbalance has driven down both gas and electricity prices, resulting in an energy market where pricing was above our cost structure only 40% of the time during the first half of the year.”

“In response to the current environment, we have focused on strengthening our balance sheet by reducing debt and improving our total liquidity to $60.7 million at quarter-end. This was driven in-part by the receipt of a $45 million prepayment during the quarter for an 11-month forward power sale, representing 22% of our projected annual output. As natural gas inventories decrease and prices recover later this year, as we currently expect, we are well positioned to navigate the current environment and drive future power sales that can reshape Hallador’s financial profile.”

Second Quarter 2024 Highlights

• The Company generated $23.5 million in operating cash flow during the second quarter, which partially supported repayment of debt and funding capex.
  • Total bank debt was $45.5 million with total liquidity of $60.7 million at June 30, 2024. This compares to total bank debt of $91.5 million and total liquidity of $26.2 million at December 31, 2023.
  • The Company’s leverage ratio was 2.12x at June 30, 2024, compared to 1.32x at December 31, 2023.
  • Capital expenditures were $13.2 million for the second quarter and $28.0 million year-to-date. The Company remains on track with its targeted $43 million capital expenditure budget for 2024.

• Hallador continues to emphasize electric sales as an independent power producer.
  • Electric Sales were $56.8 million compared to $71.0 million in the year-ago period. The decrease was driven by the buildup of natural gas inventory levels in the broader market reducing the demand for and pricing of electric power.  
  • Coal Sales were $32.8 million compared to $88.6 million in the year-ago period. The decrease was driven by lower demand due to lower natural gas prices.

• The Company continues to focus on forward sales to hedge its energy position.
  • At quarter-end, Hallador had total forward energy and capacity sales to 3^rd party customers of $871.7 million through 2029.
    
  • The Company signed an 11-month, $45 million forward power purchase agreement (PPA) during the quarter with one of the largest global asset managers.
    
  • Negotiations continue to advance in response to the Company’s data center targeted RFP, with the potential to sign a long-term contract.

Financial Summary ($ in Millions and Unaudited)
	Q2 2023				Q1 2024				Q2 2024
Electric Sales	$	71.0			$	58.8			$	56.8
Coal Sales - 3rd Party	$	88.6			$	49.6			$	32.8
Other Revenue	$	1.6			$	1.3			$	1.3
Total Revenue	$	161.2			$	109.7			$	90.9
Net Income (Loss)	$	16.9			$	(1.7	)		$	(10.2	)
Operating Cash Flow	$	18.1			$	16.4			$	23.5
Adjusted EBITDA*	$	35.3			$	6.8			$	(5.8	)

_{* Non-GAAP financial measure, defined as operating cash flows less effects of certain subsidiary and equity method investment activity, plus bank interest, less effects of working capital period changes, plus other amortization}

Adjusted EBITDA should not be considered an alternative to net income, income from operations, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP. Our method of computing Adjusted EBITDA may not be the same method used to compute similar measures reported by other companies.

Management believes the non-GAAP financial measure, Adjusted EBITDA, is an important measure in analyzing our liquidity and is a key component of certain material covenants contained within our Credit Agreement, specifically a maximum leverage ratio and a debt service coverage ratio.  Noncompliance with the leverage ratio or debt service coverage ratio covenants could result in our lenders requiring the Company to immediately repay all amounts borrowed.  If we cannot satisfy these financial covenants, we would be prohibited under our Credit Agreement from engaging in certain activities, such as incurring additional indebtedness, making certain payments, and acquiring and disposing of assets.  Consequently, Adjusted EBITDA is critical to the assessment of our liquidity.  The required amount of Adjusted EBITDA is a variable based on our debt outstanding and/or required debt payments at the time of the quarterly calculation based on a rolling prior 12-month period.

Reconciliation of the non-GAAP financial measure, Adjusted EBITDA, to cash provided by operating activities, the most comparable GAAP measure, is as follows (in thousands) for the three and six months ended June 30, 2024 and 2023, respectively.

Reconciliation of GAAP "Cash provided by (used in) operating activities" to non-GAAP "Adjusted EBITDA"  (In $ Thousands and Unaudited)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2024				2023				2024				2023
Cash provided by operating activities	$	23,522			$	18,131			$	39,891			$	44,243
Current income tax expense		—				61				—				493
Loss from Hourglass Sands		—				1				1				2
Loss from Sunrise Indemnity		6				—				12				—
Distribution from Sunrise Energy		—				—				—				(625	)
Bank and convertible note interest expense		3,326				2,517				6,859				5,204
Working capital period changes		(30,305	)			12,546				(43,480	)			16,390
Other long-term asset and liability changes		(466	)			(253	)			(1,403	)			(704	)
ASC 606 Capacity Adjustment		(2,455	)			—				(3,703	)			—
Cash paid on asset retirement obligation reclamation		(37	)			566				602				931
Other amortization		613				1,728				2,248				3,378
Adjusted EBITDA	$	(5,796	)		$	35,297			$	1,027			$	69,312
Cash (used in) provided by investing activities	$	(10,720	)		$	(17,081	)		$	(25,570	)		$	(30,548	)
Cash (used in) provided by financing activities	$	(8,446	)		$	(1,029	)		$	(10,716	)		$	(13,751	)

Solid Forward Sales Position - Segment Basis, Before Intercompany Eliminations (unaudited):

	2024				2025				2026				2027				2028				2029				Total
Power
Energy
Contracted MWh (in millions)		1.75				2.48				1.83				1.78				1.09				0.27				9.20
Average contracted price per MWh	$	36.22			$	35.70			$	55.37			$	54.65			$	52.98			$	51.00
Contracted revenue (in millions)	$	63.39			$	88.54			$	101.33			$	97.28			$	57.75			$	13.77			$	422.06
Capacity
Average daily contracted capacity MWh		772				801				744				623				454				100
Average contracted capacity price per MWd	$	207			$	198			$	230			$	226			$	225			$	230
Contracted capacity revenue (in millions)	$	29.40			$	57.89			$	62.46			$	51.39			$	37.39			$	3.47			$	242.00
Total Energy & Capacity Revenue
Contracted Power revenue (in millions)	$	92.79			$	146.43			$	163.79			$	148.67			$	95.14			$	17.24			$	664.06
Coal
Priced tons - 3rd party (in millions)		1.26				1.78				0.50				0.50				—				—				4.04
Avg price per ton - 3rd party	$	50.08			$	50.04			$	55.50			$	55.50			$	—			$	—
Contracted coal revenue - 3rd party (in millions)	$	63.10			$	89.07			$	27.75			$	27.75			$	—			$	—			$	207.67
Committed and unpriced tons - 3rd party (in millions)		—				1				1				1				—				—				3
Total contracted tons - 3rd party (in millions)		1.26				2.78				1.50				1.50				—				—				7.04
TOTAL CONTRACTED REVENUE (IN MILLIONS) - CONSOLIDATED	$	155.89			$	235.50			$	191.54			$	176.42			$	95.14			$	17.24			$	871.73
Priced tons - Merom (in millions)		0.60				2.30				2.30				2.30				2.30				—				9.80
Avg price per ton - Merom	$	51.00			$	51.00			$	51.00			$	51.00			$	51.00			$	—
Contracted coal revenue - Merom (in millions)	$	30.60			$	117.30			$	117.30			$	117.30			$	117.30			$	—			$	499.80
TOTAL CONTRACTED REVENUE (IN MILLIONS) - SEGMENT	$	186.49			$	352.80			$	308.84			$	293.72			$	212.44			$	17.24			$	1,371.53

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Statements that are not strictly historical statements constitute forward-looking statements and may often, but not always, be identified by the use of such words such as "expects," "believes," "intends," "anticipates," "plans," "estimates," "guidance," "target," "potential," "possible," or "probable" or statements that certain actions, events or results "may," "will," "should," or "could" be taken, occur or be achieved. Forward-looking statements are based on current expectations and assumptions and analyses made by Hallador and its management in light of experience and perception of historical trends, current conditions and expected future developments, as well as other factors appropriate under the circumstances that involve various risks and uncertainties that could cause actual results to differ materially from those reflected in the statements. These risks include, but are not limited to, those set forth in Hallador's annual report on Form 10-K for the year ended December 31, 2023, and other Securities and Exchange Commission filings. Hallador undertakes no obligation to revise or update publicly any forward-looking statements except as required by law.

Conference Call and Webcast

Hallador management will host a conference call Tuesday, August 6, 2024 at 5:00 p.m. Eastern time to discuss its financial and operational results, followed by a question-and-answer period.

Date: Tuesday, August 6, 2024
Time: 5:00 p.m. Eastern time
United States local: (404) 975-4839
United States toll-free: (833) 470-1428
Access code: 933229
Webcast: HNRG Q2 2024 Earnings Call

The conference call will also be broadcast live and available for replay in the investor relations section of the Company’s website at www.halladorenergy.com.

Hallador Energy Company  Condensed Consolidated Balance Sheets  (in thousands, except per share data)  (unaudited)
	June 30,				December 31,
	2024				2023
ASSETS
Current assets:
Cash and cash equivalents	$	6,446			$	2,842
Restricted cash		4,282				4,281
Accounts receivable		19,098				19,937
Inventory		32,595				23,075
Parts and supplies		39,459				38,877
Prepaid expenses		2,027				2,262
Total current assets		103,907				91,274
Property, plant and equipment:
Land and mineral rights		115,486				115,486
Buildings and equipment		531,413				537,131
Mine development		164,475				158,642
Finance lease right-of-use assets		19,869				12,346
Total property, plant and equipment		831,243				823,605
Less - accumulated depreciation, depletion and amortization		(349,462	)			(334,971	)
Total property, plant and equipment, net		481,781				488,634
Investment in Sunrise Energy		2,305				2,811
Other assets		7,176				7,061
Total assets	$	595,169			$	589,780
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of bank debt, net	$	17,938			$	24,438
Accounts payable and accrued liabilities		45,890				62,908
Current portion of lease financing		6,204				3,933
Deferred revenue		84,772				23,062
Contract liability - power purchase agreement and capacity payment reduction		40,735				43,254
Total current liabilities		195,539				157,595
Long-term liabilities:
Bank debt, net		24,734				63,453
Convertible notes payable		—				10,000
Convertible notes payable - related party		—				9,000
Long-term lease financing		10,699				8,157
Deferred income taxes		5,614				9,235
Asset retirement obligations		15,335				14,538
Contract liability - power purchase agreement		25,076				47,425
Other		2,002				1,789
Total long-term liabilities		83,460				163,597
Total liabilities		278,999				321,192
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.10 par value, 10,000 shares authorized; none issued		—				—
Common stock, $.01 par value, 100,000 shares authorized; 42,599 and 34,052 issued and outstanding, as of June 30, 2024 and December 31, 2023, respectively		426				341
Additional paid-in capital		186,945				127,548
Retained earnings		128,799				140,699
Total stockholders’ equity		316,170				268,588
Total liabilities and stockholders’ equity	$	595,169			$	589,780

Hallador Energy Company  Condensed Consolidated Statements of Operations (in thousands, except per share data)  (unaudited)
	Three Months Ended June 30,								Six Months Ended June 30,
	2024				2023				2024				2023
SALES AND OPERATING REVENUES:
Electric sales	$	56,846			$	71,017			$	115,601			$	163,409
Coal sales		32,801				88,574				82,431				183,176
Other revenues		1,267				1,603				2,554				2,943
Total sales and operating revenues		90,914				161,194				200,586				349,528
EXPENSES:
Fuel		10,439				32,641				18,498				88,614
Other operating and maintenance costs		35,912				41,908				73,394				74,428
Utilities		3,396				4,343				7,770				8,840
Labor		26,555				36,528				61,723				77,059
Depreciation, depletion and amortization		13,649				17,169				29,092				35,145
Asset retirement obligations accretion		399				461				798				912
Exploration costs		47				305				117				511
General and administrative		7,803				5,595				13,747				12,542
Total operating expenses		98,200				138,950				205,139				298,051
INCOME (LOSS) FROM OPERATIONS		(7,286	)			22,244				(4,553	)			51,477
Interest expense (1)		(3,735	)			(3,541	)			(7,672	)			(7,440	)
Loss on extinguishment of debt		(1,937	)			—				(2,790	)			—
Equity method investment (loss)		(257	)			(217	)			(506	)			(148	)
NET INCOME (LOSS) BEFORE INCOME TAXES		(13,215	)			18,486				(15,521	)			43,889
INCOME TAX EXPENSE (BENEFIT):
Current		—				61				—				493
Deferred		(3,011	)			1,510				(3,621	)			4,430
Total income tax expense (benefit)		(3,011	)			1,571				(3,621	)			4,923
NET INCOME (LOSS)	$	(10,204	)		$	16,915			$	(11,900	)		$	38,966
NET INCOME (LOSS) PER SHARE:
Basic	$	(0.27	)		$	0.51			$	(0.32	)		$	1.18
Diluted	$	(0.27	)		$	0.47			$	(0.32	)		$	1.08
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		37,879				33,137				37,026				33,061
Diluted		37,879				36,708				37,026				36,696
(1) Interest Expense:
Interest on bank debt	$	2,779			$	2,055			$	5,584			$	4,310
Other interest		547				462				1,275				894
Amortization:
Amortization of debt issuance costs		409				1,024				813				2,236
Total amortization		409				1,024				813				2,236
Total interest expense	$	3,735			$	3,541			$	7,672			$	7,440

Hallador Energy Company  Condensed Consolidated Statements of Cash Flows (in thousands)  (unaudited)
	Six Months Ended June 30,
	2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(11,900	)		$	38,966
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax (benefit)		(3,621	)			4,430
Equity loss – Sunrise Energy		506				148
Cash distribution - Sunrise Energy		—				625
Depreciation, depletion, and amortization		29,092				35,145
Loss on extinguishment of debt		2,790				—
Loss (gain) on sale of assets		(246	)			58
Amortization of debt issuance costs		813				2,236
Asset retirement obligations accretion		798				912
Cash paid on asset retirement obligation reclamation		(602	)			(931	)
Stock-based compensation		2,247				2,001
Amortization of contract asset and contract liabilities		(24,868	)			(22,162	)
Other		1,402				704
Change in operating assets and liabilities:
Accounts receivable		839				8,461
Inventory		(9,520	)			(9,322	)
Parts and supplies		(582	)			(5,564	)
Prepaid expenses		2,140				282
Accounts payable and accrued liabilities		(11,107	)			(11,867	)
Deferred revenue		61,710				121
Net cash provided by operating activities		39,891				44,243
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(28,044	)			(30,610	)
Proceeds from sale of equipment		2,474				62
Net cash used in investing activities		(25,570	)			(30,548	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on bank debt		(86,500	)			(37,013	)
Borrowings of bank debt		40,500				26,000
Payments on lease financing		(2,665	)			—
Proceeds from sale and leaseback arrangement		3,783				—
Issuance of related party notes payable		5,000				—
Payments on related party notes payable		(5,000	)			—
Debt issuance costs		(76	)			(1,629	)
ATM offering		34,515				—
Taxes paid on vesting of RSUs		(273	)			(1,109	)
Net cash used in financing activities		(10,716	)			(13,751	)
Increase (decrease) in cash, cash equivalents, and restricted cash		3,605				(56	)
Cash, cash equivalents, and restricted cash, beginning of period		7,123				6,426
Cash, cash equivalents, and restricted cash, end of period	$	10,728			$	6,370
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:
Cash and cash equivalents	$	6,446			$	2,337
Restricted cash		4,282				4,033
	$	10,728			$	6,370
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	6,312			$	5,010
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Change in capital expenditures included in accounts payable and prepaid expense	$	(1,694	)		$	426
Stock issued on redemption of convertible notes and interest	$	22,993			$	—

About Hallador Energy Company

Hallador Energy Company (Nasdaq: HNRG) is a vertically-integrated Independent Power Producer (IPP) based in Terre Haute, Indiana. The Company has two core businesses: Hallador Power Company, LLC, which produces electricity and capacity at its one Gigawatt (GW) Merom Generating Station, and Sunrise Coal, LLC, which produces and supplies fuel to the Merom Generating Station and other companies. To learn more about Hallador, visit the Company’s website at www.halladorenergy.com.

Company Contact

Marjorie Hargrave
Chief Financial Officer
(303) 917-0777
MHargrave@halladorenergy.com

Investor Relations Contact

Sean Mansouri, CFA
Elevate IR
(720) 330-2829
HNRG@elevate-ir.com