Coal Tattoo

Bob Murray makes another big buy

Robert Murray

Another big coal deal by Ohio-based Murray Energy was announced last night. Here’s the press release:

Murray Energy Corporation and Foresight Energy GP LLC (“FEGP”) have announced that Murray Energy and Foresight Reserves, LP (the current owner of FEGP) have entered a definitive agreement for a transaction whereby Murray Energy will acquire a controlling interest in Foresight Energy LP (NYSE: FELP) and FEGP (together with FELP, “Foresight Energy”), to create the premier coal mining company in the United States, controlling over nine (9) billion tons of coal reserves, and one of the leading coal companies in the world. Following the closing, Mr. Christopher Cline, the founder of Foresight Energy, will remain a significant investor in Foresight Energy, maintaining a twenty-two and five tenths percent (22.5%) equity interest in FEGP and an approximately thirty-five percent (35%) interest in FELP and will be actively involved as a member of the Board of Directors of that Company.

Bob Murray said in that release:

Mr. Chris Cline, who is very much respected in the United States coal industry, and his team at Foresight Energy, have built and operated four of the most efficient coal mines in America utilizing the longwall mining technique. We are pleased that these operations will join Murray Energy’s twelve mines employing thirteen longwall systems.

We are very excited about this new venture and the resultant world class organization. It is truly a transformative event for our companies and the entire world coal industry.

Of course, this deal comes after Murray Energy’s purchase in late 2013 of the northern West Virginia operations of CONSOL Energy, a transaction we’ve covered before here, here and here.

In explaining this latest deal, the St. Louis Post-Dispatch notes:

The combined 9 billion tons of coal reserves held by the new company would represent one of the industry’s largest.

St. Louis-based Peabody Energy, which bills itself as the world’s No. 1 privately held coal miner, reported 7.6 billion tons of proven and probable reserves, according to its most recent annual report.

Foresight recently joined the ranks of publicly held St. Louis coal companies, offering units to investors in June. It has been one of the few big miners to post profits in recent quarters, in part because its Illinois coal holdings and longwall mining equipment allow it to produce tons of coal cheaply.

All of its holdings are in the resurgent Illinois Basin, which fell out of favor decades ago as power plant operators sought cleaner-burning coal to cut back emissions. But now that many of those power plants have installed expensive scrubbing technology, Illinois coal has become a cheaper alternative to more expensive Appalachian varieties.

The Post-Dispatch also noted:

Robert Murray, Murray Energy’s founder, is one of the industry’s most outspoken advocates, and has filed several lawsuits against the federal government to fight stricter regulation of mining and carbon emissions at power plants. He also filed a lawsuit last year against Foresight Energy over disputed reserves in the Illinois Basin.

There’s also coverage from the Wall Street Journal, and a piece from Bloomberg notes:

The deal will give Murray Energy a bigger presence in the Illinois basin, a coal-mining region that’s a rare bright spot in an otherwise beleaguered and shrinking industry.

Cline said:

This is a great day for American coal. Bob Murray and I both started as miners, and we know how to run safe, efficient and low cost mining operations. We think that we will do that even better together by sharing best practices and exploiting obvious synergies on cost. Together, we will progress our efforts to deliver reliable and low cost electricity to America’s factories, schools, hospitals, and homes.