The recent troubles at Patriot Coal Corp. (NYSE: PCX) have reflected the problems the entire coal mining industry faces in the US — the low cost of natural gas. Patriot, a 2007 spin-off from Peabody Energy Corp. (NYSE: BTU), has closed mines in an attempt to stop the bleeding, but that didn’t help.
This morning the company announced that it has replaced CEO Richard Whiting with Irl Engelhardt, who will retain his role as chairman of Patriot’s board and assume the role of CEO. The company’s COO will assume the title of President to go with the COO title. Patriot also named a new lead independent director.
If Patriot’s board expects any big changes from the new leadership, it could be sorely disappointed. Here’s what Engelhardt had to say:
[We] will immediately focus on improving Patriot’s competitive position as well as its financial structure to enhance value for our shareholders and all other groups who have a stake in the Company’s success. Our team has successfully navigated the inherent cycles in the energy industry in the past, and I am confident Patriot can overcome the industry challenges that we currently face.
Happy talk and cheerleading won’t get it done. Patriot needs cash and the company is having trouble getting it. A $625 million bond offering is having trouble getting underwriting support, and the company reportedly hired firms to help it figure out what to do next should the financing deal fail to be completed.
Engelhardt and Bennett Hatfield, the new President/COO, have in common long histories in the coal business. Engelhardt was CEO at Peabody and Hatfield was CEO at International Coal Group until its acquisition by Patriot. The industry’s biggest problem is the low price of natural gas. Its second biggest problem is stiff new regulation on carbon emissions. The coal industry has never dealt with the first problem before, and the second problem is usually solved by screaming at politicians from mining states. Unless we see a more imaginative approach this time, Patriot really has little chance of surviving. But the words “coal” and “imagination” aren’t often seen in the same sentence.
Patriot’s shares are up about 3.7% in pre-market trading this morning, at $2.55 in a 52-week range of $1.36-$24.99.