Good morning, and welcome to the Contura Energy First Quarter 2020 Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Emily O'Quinn, Vice President of Corporate Communications. Ms. O'Quinn, please go ahead.

Thanks, Anita, and, good morning, everyone. Before we begin, let me remind you that, during our prepared remarks and the Q&A period, our comments relating to expected business and financial performance contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements and some of the factors that can affect them, please refer to the company's first quarter 2020 earnings release and the associated SEC filing. Please also see those documents for information about our use of non-GAAP measures and their reconciliation to GAAP measures. Participating on the call today are Contura's Chairman and Chief Executive Officer, David Stetson; and Chief Financial Officer, Andy Eidson. Also participating on the call is Jason Whitehead, our Chief Operating Officer, who is available to answer questions on operations. With that, I'll turn the call over to David.

Thank you, Emily. Good morning, everyone, and thanks for joining the call today. As we all know, over the last several weeks, the coronavirus pandemic has created unprecedented uncertainty in our country and across the world. This has not only disrupted global economies to a degree not seen in my lifetime, but has also created a public health challenge. These are difficult times, and as we said on our last earnings call, we are committed to taking precautions that will reduce the risk of exposure to COVID-19 for our people at Contura. We understand that these are challenging circumstances for everyone, and we are grateful to our more than 4,000 employees for their dedication and cooperation in implementing precautionary measures across the company. The health and safety of everyone on our team is important to us, and we take these issues very seriously. As I turn to our operational results for the first quarter, I want to start by highlighting our exceptional EBITDA of $60 million for the quarter, which was largely driven by outstanding cost performance by our operations team. Our Central App net cost reached a multiyear low of $70.68 per ton compared to fourth quarter cost of $82.36, which was already a meaningful improvement over previous quarters. This stellar cost performance is among the high points of the quarter. When I returned to Contura last fall, I sat down with the management team to discuss our vision for Contura. We recognized that we had to drive efficiencies at both the operating and corporate levels in order to secure the long-term viability and profitability of Contura. The team put a great short and long-term strategy in place to achieve this vision, and the success of that strategy is evident in the first quarter results. I want to thank…

Thanks, David. Obviously, the uncertainty around the impacts of the coronavirus both in terms of the human toll and the new economic realities has created an extremely difficult environment to plan for. And as David mentioned, it's going to be impossible, particularly right now and likely for the very near future to know exactly what the new normal will look like. And for that reason, Contura suspended its 2020 guidance a few weeks back. And we do expect it to remain suspended for the next several weeks, until we do have some better visibility on how things are going to develop. Given that backdrop, it's only appropriate that I'll begin by discussing the most important financial items and the items that most people will likely be very interested in our cash position, liquidity and our cash flows. We ended the quarter with approximately $227 million in unrestricted cash and $156 million of restricted cash. Including $30 million available under our ABL, the total available liquidity was $257 million at the end of March. As we announced on March 23, we drew $57.5 million on our revolving credit facility as a precautionary measure to bolster our cash balances and increase financial flexibility. Now, this revolver draw is reflected in our first quarter cash balance that I mentioned. Naturally, an ABL is subject to variability and volatility based on accounts receivable and inventory balances and values. And as such, the overall capacity of our ABL can fluctuate. So as we go forward, there could be some movement in the availability but the long-term trends typically dictate a relatively static figure. Turning to our cash flows. Our first quarter operating cash flow was roughly breakeven while CapEx was just under $50 million. Inventory build was approximately $22 million during the quarter. And as…

Thank you. [Operator Instructions] The first question today comes from Lucas Pipes with B. Riley FBR. Please go ahead.

Hey, guys. Good morning. This is actually Dan Day on for Lucas. I just want to congratulate you on the cost performance on the CAPP - Met side. It was a really -- really nice job there. My first question here, we've seen a lot of blast furnace closures, especially, in the U.S. and in Europe. You touched on it in the prepared comments. Just are you guys seeing coke plants, deferring volumes or outside of Q2, Q3? Just any other color on impacts from kind of idled blast furnaces and coke plants. Thanks.

I'll start that off. Dan Horn's also with us. He can provide additional color. But the answer simply is, yes. I mean you're seeing deferrals. We're monitoring this. Dan's in constant communication with both our domestic and international customers. We're reading the same thing. We're hearing the same thing that's being put out in publications. So we are certainly seeing the deferrals both in the second and third quarter.

Thank you.

Yes. I'll start off by saying we've seen this before. We saw this in 2009 and to a lesser degree in 2015. When blast furnaces start to come offline, of course, coke plants have to slow down to match. We follow that and we have seen some deferrals and we're matching our production to those deferrals. Not a surprise at all. We'll watch the blast furnaces frankly as a leading indicator. And as those do come back online later in the year we'll adjust our production. And we know our customers will adjust their co-production accordingly too. It's nothing we haven't seen before.

Great. Thanks. One other on, sort of, the capital projects you guys have lined out like Eagle, Lynn Branch, Road Fork 52. Any impacts from this to those? I think, you had said, Lynn Branch first coal in third quarter. Is there any impact to that time line? Or anything else we should be thinking about?

No, no impact. We're -- those projects are continuing as we've previously indicated.

Great. Thank you. I guess, I'll sneak one more in. With these -- the AMT tax refund, the CARES Act deferrals is there, I know -- respecting you guys have suspended guidance is there a path to positive free cash flow in 2020?

This is Andy. I'll take that one. When you look at all of our below-the-line cash items things that go back to the bankruptcy funding of reclamation accounts and things like that, 2020 was setting up to be a relatively difficult year from a cash burn, perspective as it was. I think it's hard when you look at it all inclusive of those -- all those items to really bridge that gap. I think, we're still going to be in a position of cash burn during the year. And naturally any pressures we see in the second and third quarter will further increase the burn there. But from a liquidity perspective, we still feel pretty solid that we've got things as tightened up as humanly possible at this point and we continue to look for other areas to improve just to shore up for whatever's to come.

Awesome. Appreciate all that color. Thanks for taking my questions. And best of luck.

Thank you.

[Operator Instructions] The next question comes from Mark Levin with The Benchmark Company. Please go ahead.

Okay. Great. Thank you very much. So first congratulations on the met coal cash cost, kind of a huge -- huge increase – decrease, I should say. I guess, my question is the sustainability of those costs in the second, third and fourth quarter. It sounds like you'll be dealing with less volume in the second and third quarter to be able to spread out those costs. But maybe how sustainable is keeping costs down around that $70 level?

Well, we're all looking at each other. Who wants to grab that answer? Obviously, as I have explained in the past and you know very well Mark it all depends on your production levels when you get started looking at cost. And we suspended guidance because we didn't really have any view of visibility into what the second, third, fourth quarter will look like for the rest of this year. The news -- the takeaway from my perspective is is that even as difficult as the markets were in the first quarter we kept production where we needed to keep it. And those costs easily came in line there. So -- but not -- I didn't mean easily but it came in line. Jason you want to chat about this at all with Mark?

Sure. I mean I think you both hit the nail on the head. As long as we're able to run our mines near capacity I would say the costs are sustainable. It's interesting how -- I think Andy mentioned a 17% increase quarter-over-quarter or a 17% reduction quarter-over-quarter a 9% increase on feet per shift. And if you look at Q1 of last year, a 34% decrease on cash cost and a 17% increase on productivity looking at the deep mine productivity. So, if you look at those four numbers, it's really to see -- it's really clear the relationship between productivity or volume and cost. So, I think as long as the mines are able to run at a rate that's near capacity then those are the types of numbers we should expect.

Yes and Mark this is Andy to add one last piece to that. If you kind of imagine a world where the market and our costs were both flat then Jason's costs would likely have come in even a little bit better than they did because we continue to have to reflect the impact of lower cost or market adjustments. And that's the bad thing when we've had -- we've got inventory at higher costs as Jason keeps taking the cost down as we adjust those monthly the cost -- some of the cost of inventory, that's still sitting on the books have to flush through current period cost of sales. And so if you flatten that out and you flatten the market, then it's even better. So, I think by and large, these cost reductions are not just sustainable but they're -- I don't want to put any more pressure on Jason, but there always could be a little bit more squealing there to squeeze it out.

It sounds -- and you'll be bringing on some lower cost mines I assume too, so your mix would improve I would imagine over time as well. Is that right?

Yes. With the three projects which will -- when they come online they should constitute roughly 30% -- between 25% and 30% of our productive capacity. And with those all lower 60s if not $60 million on the button projected cost it's not unreasonable to expect some contribution there.

Okay, great. And then just in terms of now the here and now I realize you guys suspended guidance. but in terms of the stuff that's controllable CapEx, SG&A, stuff that you guys do have some visibility or should have some visibility around, any comments or thoughts about how CapEx will trend in the current environment for the remainder of this year? And then also SG&A-type savings things that you can do to control cost maybe relative to where you were in previous guidance. Is there upside to the lower end of those guidance ranges that you had previously provided?

Yes, again, trying to avoid issuing guidance when we've not issued guidance. Just same way as it is with operational costs. There's always a little bit more a little bit more squeal to be taken out. We have been taking very close looks at SG&A, but we feel like we're getting pretty close to the critical mass required to be a public company. So, I don't know that there's a significant amount left. There's always going to be a little bit. But from a CapEx perspective Jason we're constantly communicating about the different projects and where we may be able to defer some capital. So, again, I think there are possibilities. I don't want to speak to the quantum, but those are things that we're evaluating daily.

And then this question is for Dan. Just about the market in general, when you look at some of the U.S. met prices and maybe the indices that we read on Platts and other places like that. Dan do you think that those prices that we see printed are representative of the prices that you guys get? Or are things just so tough out there that you have to take discounts either mid-single, high single digit whatever the case may be discounts to those indices?

Mark, look I think we've said before, when the prices are going up we tend to sell at premiums to the index. And when prices are going down the industry tends to sell at discounts. Beyond that, we sell so many different products low-vol, medium-vol, high-vol semisoft. There's a lot of different answers to that question. And I'm really not going to give you any of them, but I could tell you look we're matching the market. We're following the market. It's difficult. I can't predict it either. I wish I could. But we're staying with it, and we'll just have to see. Like I said we've seen it before. I'm confident, we'll pull through this.

Got it. And then last and final question. The – any update on Cumberland and your thoughts regarding that from either strategic perspective or from a CapEx perspective, however, you want to address it?

Mark, this is David. I don't have anything beyond what we had said previously. Obviously in these markets preservation of capital is key. We spoke the last time about some preparatory work we did as part of the impoundment. But at this point in time, I don't have any real update on Cumberland beyond that, we're still evaluating the future direction there.

Great. Thanks congrats on the cost side.

Thank you, Mark. Appreciate it.

This concludes our question-and-answer session. I would like to turn the conference back over to David Stetson for any closing remarks.

Again, thanks everyone for joining us today and your interest in Contura Energy. Have a great rest of your day. Thank you so much.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.