Friday, July 20, 2012

Coal Stocks Plunge, Led by Patriot

Coal stocks fell hard on Tuesday as the sector was rocked by concerns about Patriot Coal’s (PCX) balance sheet.

Patriot Coal plunged today on a news report out late on Monday that said the company is talking to advisers about the possibility of restructuring. Patriot said on Tuesday that it is working with lenders and lawyers to “achieve an optimal financing package” but didn’t elaborate on the report.

Patriot fell more than 50% at one point, before ending the day down 35%.

Other coal stocks were also trounced, with James River Coal (JRCC) falling 12% and Arch Coal (ACI) falling 7.4%. Coal stocks have fallen hard this year as thermal coal demand has fallen. New regulations, a warm winter, and the decision by numerous power plants to switch to cheap natural gas have all put pressure on the stocks.

But Sterne Agee analysts published a note earlier saying that the sector is “oversold.”

“Despite an accelerated risk-off trade, recent data are encouraging.� Shares appear underpriced and reflect a much more onerous thermal and met-coal pricing scenario,” wrote Michael Dudas.

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