Shoulder Season

James River (JRCC) reported this morning.  The Q2 EBITDA being less than two times interest expense is scary.  Throw on capex and they are burning cash.  Fortunately, they do have strong liquidity with their next debt maturity not due until December 1, 2015.  Additionally, as of six weeks ago JRCC’s 2019 notes were trading near half of par (Leveraged Loan).  Meanwhile, management had extensive commentary on natural gas in their remarks.  Natty is the key…

The coal stocks are ripping higher today with natural gas up 5% this morning on light storage numbers (Reuters).  I did see speculation on Investor Village “the EIA had an undisclosed 6 BCF correction this week to correct for an undisclosed 6 BCF error last week.”

“Coal displacement by natural gas is more price responsive than the market believes, and for that displacement to be large enough to send US gas storage down to around the 4 Tcf mark by the end of the injection season, gas prices need to be lower than $3/MMBtu, according to a Barclays analysis released Monday”  Detailed displacement commentary is at Platts.

Analysts expect depressed US gas prices to continue:  ”If we take a weather-normal view, the answer is the supply/demand balance is  pretty bad. We need supply to really adjust downward,”  Brisbane Times

Nat Gas approaching upper resistance area at CME GroupGas may revisit $2 as drop in supply glut slows at Financial Post. (re-post)

Seems the coal producers want to wait on contract negotiations, with the expectation of better fundamentals and pricing.  Coal inventory is still very heavy.  PBR coal is recovering first (think CLD).  Markets look forward.  The dynamics are interesting…