How Long Can Alpha Natural Resources, Inc. (NYSE:ANR) Keep Its Head Over Water?

Denver, CO, 10/28/2013 (Avauncer.com) –Technology and low gas prices have contributed to the downfall of Alpha Natural Resources Inc. (NYSE:ANR). The company is a diversified coal producer with 26 coal preparation plants and 107 mines. Alpha supplies coal to both thermal power plants and metallurgical plants. Both these industries used to pay a premium for ‘clean’ coal. Introduction of scrubbers saw the premiums vanish. These coal users could use low cost, no-so-clean coal and still meet environmental guidelines. Low prices of natural gas saw many such users shifting to natural gas for their fuel needs.

The company cannot change its line of business. It has to live through the bad situation. Alpha is not going down without giving it a fight. It is working on reducing its costs and has committed to reduce costs in the Western operations by 3%. The company is also taking steps to reduce capital expenditure. This will enable the company to maintain liquidity and preserve cash. The company does not have any maturity of long term debt till 2015. As per the last quarterly report, the company had $1.9 billion as liquidity reserves, including $1 billion in cash.  Alpha is also looking at asset sale of non-core businesses to raise further cash and shore up the reserves. The company has identified 20,000 acres of Marcellus shale that it can dispose off. The sale may not yield a significant amount as its estimated value is only between $100 million. The company is also sitting on a huge stockpile of unsold inventory.

The company and the industry as such, are looking at improved market conditions to get out of their situation. This may take a long time in coming. Alpha has lost money in all the last seven quarters. Investors will need to watch out for signs of further weakness, as the situation will not improve in the near future. Any new investments can be considered as risky. The stock closed at $6.77 per share at the end of trading on October 25, 2013.

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