Patriot Coal on Friday fielded informal pitches from restructuring advisors, said three sources familiar with the matter. The distressed coal miner aims to retain the professionals in the even[t] the company can’t satisfy its near-term financing needs.

The company failed to syndicate a $625 million bond offering last week after announcing that it lost a key customer. The situation is getting desperate and a bankruptcy filing is a real possibility at this point.

Other coal miners shares are also getting hit hard: Peabody Energy Corp. (NYSE: BTU), which spun-off Patriot in 2007, is down -5%, Arch Coal Inc. (NYSE: ACI) is down -10%, Consol Energy Inc. (NYSE: CNX) is down -3.8%, Alpha Natural Resources Inc. (NYSE: ANR) is down -5.5%, James River Coal Co. (NASDAQ: JRCC) is down -8.4%, Walter Energy Inc. (NYSE: WLT) is down -5.6%, Cloud Peak Energy Inc. (NYSE: CLD) is down -2.8%, and the Market Vectors Coal ETF (AMEX: KOL) is down -2.2%.

The weakness in domestic coal demand has absolutely clubbed the coal miners in the last year or so. Rising natural gas prices have led to some happy talk about coal, but there is nothing but bad news on the horizon for the industry.

Shares of Patriot Coal are down about -45% at $1.84 after posting a new 52-week low of $1.67 earlier today. Peabody also posted a new low of $23.30, as did Arch Coal at $6.84, James River at $3.12, Walter Energy at $48.35, and the Market Vectors ETF at $26.05. And except for Cloud Peak, the others came within pennies of posting new lows.

Paul Ausick

Patriot dropped its price estimate by $25-$20/ton and estimated shipments of 3.9 million of currently priced tons in the remainder of 2012 and just 200,000 currently priced tons in 2013. Pricing on the 2013 shipments is just $122/ton, compared with $145/ton for the rest of 2012.

Shipments of thermal coal used to generate electricity have been hurting coal share prices for nearly a year now as natural gas prices remain very low. But met coal, which is used in steel-making, has fared a little better and met coal producers have had some backstop for the downturn in thermal coal sales. But not after today.

Patriot is dragging the entire coal mining sector down with it. Peabody Energy Corp. (NYSE: BTU) is off -4.4%, Consol Energy Corp. (NYSE: CNX) is off -4.1%, Arch Coal Inc. (NYSE: ACI) is off -4.6%; Alpha Natural Resources Inc. (NYSE: ANR) is off -8.8%, Walter Energy Corp. (NYSE: WLT) is off -6%, James River Coal Corp. (NASDAQ: JRCC) is off -4.3%, and Cloud Peak Energy Corp. (NYSE: CLD) is off -3.2%. And the more met coal a company mines, the worse the story. That’s why Alpha and Walter are down so much further than the others.

Peabody has posted a new 52-week low this morning of $26.72. James River also struck a new annual low of $3.58, and Alpha posted a new low of $11.95.

Patriot, of course, has done even worse. Shares are down -15.4% at $4.09, and the stock’s new 52-week low is $4.08. The prior range was $4.82-$24.99.

Paul Ausick

The company’s results are far worse than those of either Peabody Energy Co. (NYSE: BTU) or Cloud Peak Energy Inc. (NYSE: CLD), both of which reported a profit. Peabody’s profit came from overseas operations and Cloud Peak’s from shipping its Powder River Basin coal to China. Alpha Natural Resources Incl. (NYSE: ANR) is expected to post an EPS loss of -$0.06 for the first quarter, Patriot Coal Corp. (NYSE: PCX) is forecast to post an EPS loss of -$0.40, and James River Coal Co. (NASDAQ: JRCC) is looking at a loss of -$0.66. Arch, comparatively speaking, didn’t fare too badly.

The company also revised its forecast, cutting full-year sales volume to a range of 136-142.5 million tons, about 10% below 2011 sales at best. Costs are rising due at least partly to lowered volumes. Rising natural gas prices, up from around $2/thousand cubic feet to around $2.30, will help coal miners a little bit, provided that exports grow as predicted and the US has a hot summer.

For the most part coal stocks are rising this morning. Even Arch is up nearly 1% after lowering its quarterly dividend from $0.11 to $0.03. Patriot Coal is up nearly 5% and Cloud Peak is up 3%. What investors are seeing is a bottom surely. But coal mines are deep, dark places that hide as much as they reveal.

Paul Ausick

Operating conditions for domestic producers of thermal coal and, to a lesser extent, metallurgical coal remain very difficult due to a mild winter, natural gas substitution in the U.S., and slowing steel production overseas. In our view, these conditions are likely to decrease demand and hurt contract pricing into 2013.

It is possible to say the same thing about other US coal producers, including Patriot Coal Corp. (NYSE: PCX), James River Coal Corp. (NASDAQ: JRCC), Alpha Natural Resources Inc. (NYSE: ANR), and Peabody Energy Corp. (NYSE: BTU). Credit ratings on all these companies is in junk territory: in late March, James River’s rating from S&P was cut to ‘B-’ and the company remained on CreditWatch with negative implications; James River’s rating is ‘B+’ and it, too, is on negative watch at S&P; Alpha’s rating at Moody’s is ‘Ba2’ and its outlook was revised in February to ‘negative’; and Peabody gets a rating of ‘Ba1’ with a ‘stable’ outlook from Moody’s.

There are those who believe this is a buying opportunity. Analysts at Sterne Agee are pleased with production cuts, particularly at Patriot Coal, and also says that it would “add to positions” in Alpha, Peabody, and James River. The implicit assumption here is that the coal situation won’t deteriorate further.

Arch Coal came with 25 cents of its 52-week low this morning. James River was within 30 cents of its 52-week low and Patriot Coal was within 50 cents. But to believe that this is the bottom is really only a bet on the weather. Steel production is flat, especially in China, and in the US fuel switching to natural gas doesn’t have much further to run but that doesn’t mean that coal will make a comeback. A really hot summer in the US could improve demand for electricity to cool the country’s homes and offices, but that will only be temporary. More far-reaching are limits on carbon emissions that could lead to the shuttering of many more coal-fired generation.

Arch Coal’s shares are down -3% at $9.35 just before noon today, in a 52-week range of $9.05-$35.06.

Paul Ausick

Peabody Energy Corp. (NYSE: BTU), Arch Coal Inc. (NYSE: ACI), Alpha Natural Resources Inc. (NYSE: ANR), Patriot Coal Co. (NYSE: PCX), James River Coal Co. (NASDAQ: JRCC), and Cloud Peak Energy Inc. (NYSE: CLD) all posted gains of anywhere from 3.5% to more than 8% yesterday. All are giving about half of that back today.

The reason is the worse-than-hoped-for report on China’s GDP growth (our coverage here). The 8.1% growth rate was sharply lower than the 8.9% growth in the fourth quarter of 2011. But investors were hoping for better — and for no apparent reason. The IMF lowered its estimate of China’s 2012 GDP growth to 8.2% earlier this week and the Chinese government itself is targeting growth at just 7.5%. If the government truly means to hit that target, more contraction in the growth rate must be assumed to be coming.

Coupled with declining domestic coal consumption, US coal miners face another quarter — at least — of tough going. Year-to-date rail transportation of coal is down by 200,000 railcars from a year ago and about the only thing that can put demand back on track is hotter-than-expected weather, which would increase the demand for air conditioning.

Yesterday’s bets on coal having hit a bottom were likely premature. Here’s the take from Credit Suisse, cited at nasdaq.com:

We are lowering our 2012 met coal forecast by ~3% (2013 unchanged) and our seaborne thermal coal price by ~10% in both 2012 and 2013. Domestically, we are lowering our U.S. thermal coal price by an average of 11% for 2013.

Share prices for these coal companies are down as much as -80% in the past 12 months, with Cloud Peak down the least at -30%. If the analysts at Credit Suisse are right, there’s still room at the bottom.

Peabody is down nearly -4% today at $28.19 in a 52-week range of $27.11-$68.30.

Arch Coal is down nearly -6.5% at $9.88 in a 52-week range of $9.88-35.06.

Alpha is down more than -3% at $15.57 in a 52-week range of $13.80-$59.20.

James River is down -2.6% at $4.88 in a 52-week range of $4.51-$25.39.

Cloud Peak is down more than -4% at $14.76 in a 52-week range of $14.65-$24.34.

Paul Ausick

Coal prices did not suddenly rise, but there is plenty of belief that they soon will. Analysts at FBR Capital Markets have said that the recent round of fuel-switching from coal to cheaper natural gas is about to end. According to The Wall Street Journal, about 90% of the switchable power generation capacity has already made the change. In order to maintain the high rate of fuel-switching, power plants that currently burn only coal would have to undergo major renovations that would take years — and billions of dollars — to complete.

The other driver appears to be rising demand for US exports of coal. Exports doubled last year to more than 100 million tons, about 10% of US production. But there are some constraints to increasing that number again. New terminals need to be built or existing ones expanded. That’s especially true on the West Coast, with its direct access to Asian markets, particularly China.

But it’s not clear that Chinese demand is going to rise. Reuters reported yesterday that China’s five largest utilities lost a total of $317 million in January as slower economic activity in the country depressed demand for electricity. And part of that problem was the price of coal, which averaged about $121/ton. Because the government controls the price that utilities are allowed to charge for electricity, rising coal prices wreak havoc on profits.

Couple that with today’s report from the International Monetary Fund that it is lowering its forecast for China’s GDP growth in 2012 from 8.4% to 8.2%. The Chinese have themselves forecast GDP growth of just 7.5% for 2012, down from 9.2% in 2011. That hardly seems like an indicator that coal demand will rise in the Middle Kingdom.

If US domestic coal prices rise, the rise is likely to be only moderate. The Central Appalachian coal price (called CAPP) is right around $2.50/million BTUs right now, about 20% higher than natural gas. Say it rises to around $4.50 or so, about where it was last year. At some point near there, converting a power plant to a switchable unit may become cost-competitive. A sure sign to look for will be an announcement from a major utility that it plans to make the switch. That could open the floodgates to new or remodeled gas-burning plants that will stop rising coal prices in their tracks.

And don’t count the US Environmental Protection Agency out of the mix either. The EPA has already proposed stricter emissions rules for new power plants and the rules nearly eliminate the possibility that another coal-fired power plant will ever be built in the US. Rules governing existing plants are still in progress, but these too could be very hard for coal-fired generators to comply with.

But hope rules today. Patriot Coal is up more than 8% at $6.23 in a 52-week range of $5.42-$2712.

Peabody is up about 7% at $29.20 in a 52-week range of $27.11-$68.30.

Arch Coal is up about 6.5% at $10.55 in a 52-week range of $9.88-35.06.

Alpha is up more than 8% at $15.83 in a 52-week range of $13.80-$59.20.

James River is up about 6% at $5.00 in a 52-week range of $4.51-$25.39.

Cloud Peak is up about 3.3% at $15.54 in a 52-week range of $14.65-$24.34.

Paul Ausick

Coal miners James River Coal Corp. (NASDAQ: JRCC), Arch Coal Inc. (NYSE: ACI), Alpha Natural Resources Inc. (NYSE: ANR), Peabody Energy Co. (NYSE: BTU), Patriot Coal Corp. (NYSE: PCX), and Consol Energy Corp. (NYSE: CNX) are closing mines, cutting production, and in general struggling to keep revenues and profits from sinking.

Warm winter weather, historically low natural gas prices, and fears of an economic slowdown in China have pushed coal stocks down by between about -40% to -80% in the past year. Even coal miners that produce substantial amounts of the more costly metallurgical coal used for steel making have suffered.

Will the market for coal turn around? Certainly summer demand for air conditioning could help. If this summer in the US is, like winter, warmer than usual, demand for coal — and natural gas — will rise and prices along with it. But coal needs to close a gap of about $0.25/million BTUs before it is again equal to the price for natural gas.

Gas producers will help if planned production cuts materialize, but absent hotter weather that may not make enough of a difference. Coal provided the energy for about 42% of US electricity generation in 2011 and the US Energy Information Administration predicts a fall to around 40% in 2012. Natural gas-fired generation is expected to grow from 24.8% of generation in 2011 to 27.1% in 2012.

A hot summer combined with lower natural gas production will be the primary drivers for thermal coal prices in the US in the next six months. Investors wanting to bet on the weather can take a chance on coal, but an equally good bet would be on just about any agricultural commodity. Over the long haul, coal might make a comeback, but that’s betting that environmental issues can be overcome or pushed aside. The future for coal looks blacker all the time.

Paul Ausick

Coal miners Peabody Energy Corp. (NYSE: BTU), Alpha Natural Resources Inc. (NYSE: ANR), Patriot Coal Corp. (NYSE: PCX), Arch Coal Inc. (NYSE: ACI), and James River Coal Co. (NASDAQ: JRCC) are getting punished by investors as a result.

Analysts at Sterne Agee have taken a contrarian view, noting that the new EPA rules do not apply to existing plants nor to plants that will commence construction in the next 12 months. The analysts say that the proposed rules will have a “minimal” effect on coal production for the foreseeable future.

If the proposed rules are adopted, though, as coal plants age and need to be renovated or replaced, the costs of renovating/building a new coal-fired plant make such a choice nearly inconceivable unless expensive — and as yet untested — technologies like carbon capture and storage are implemented. Coal’s days are probably numbered, but that number is still pretty big.

Peabody’s shares are down about -4.8% at $28.42 after posting a new 52-week low earlier today of $28.18. Alpha’s shares also hit a new 52-week low this morning of $14.71, while Patriot fell to within a nickel of its 52-week low. Arch Coal posted a new 52-week low, and James River came within three cents of its yearly low. The Market Vectors Coal ETF (NYSE: KOL) is down about -2.9% at $31.51 in a 52-week range of $27.42-$51.87.

Paul Ausick

The unofficial closing bells put the DJIA up more than 28 points to 12,980.30 (0.22%), the NASDAQ rose more than 22 points (0.74%) to 2,988.97, and the S&P 500 rose 0.62% or more than 8 points to 1,374.09.

There were several analyst upgrades and downgrades today, including First Solar Inc. (NASDAQ: FSLR) maintained ‘buy’ but target price lowered to $50 at Argus (more coverage here); Mastercard Inc. (NYSE: MA) started as ‘neutral’ at UBS; Walgreen Co. (NYSE: WAG) cut to ‘underperform’ at BofA/ML; Wendy’s Co. (NYSE: WEN) cut to ‘neutral’ at Janney; and SandRidge Energy Inc. (NYSE: SD) cut to ‘sell’ at Canaccord Genuity.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Cal Dive International Inc. (NYSE: DVR) is up 8.8% at $3.16; Edison International (NYSE: EIX) is up 1.9% at $42.65 after posting a new 52-week high of $44.40 earlier today; Nektar Therapeutics (NASDAQ: NKTR) is up 2.4% at $7.35; Seaspan Corp. (NYSE: SSW) is up 6.1% at $18.32; Sotheby’s (NYSE: BID) is down -10.2% at $35.32 (more coverage here); Dresser Rand Group Inc. (NYSE: DRC) is down -1.2% at $51.91; James River Coal Co. (NASDAQ: JRCC) is up 10.7% at $6.34; Kroger Co. (NYSE: KR) is up 2.2% at $24.32; and Martha Stewart Living Omnimedia Inc. (NYSE: MSO) is down -3.2% at $4.36.

Other standouts from today include the following stocks:

American Realty Trust Inc. (NASDAQ: ARCT) is up more than 73% at $10.40. The commercial real estate company came public this morning at $6/share, along with a tender auction to purchase up to $220 million worth of shares at a price not higher than $11/share and not less than $10.50/share.

Pegasystems Inc. (NASDAQ: PEGA) is up nearly 34% at $37.50. The business software maker beat earnings estimates last night.

Cenveo Inc. (NYSE: CVO) is up nearly 26% at $4.91. The printing company reported better-than-expected earnings last night, and has kicked off a tender offer to redeem about $460 million in debt.

Tudou Holdings Inc. (NASDAQ: TUDO) is down nearly -17% at $13.30. The Chinese online video company reported better-than-expected revenues last night, but soaring costs led to a net loss.

FriendFinder Networks Inc. (NASDAQ: FFN) is down nearly -14% at $1.76. The adult social networking company’s credit rating was cut this morning by S&P.

Stay tuned for Friday. Chicago Fed president Charles Evans and St. Louis Fed president James Bullard are giving speeches. There are no other events of note scheduled for tomorrow.

Paul Ausick

There are several stocks trading more heavily than usual this morning, and also experiencing large gains or drops in share prices. These include the American Realty Trust Inc. (NASDAQ: ARCT), Pegasystems Inc. (NASDAQ: PEGA), James River Coal Co. (NASDAQ: JRCC), Sauer-Danfoss Inc. (NYSE: SHS), and Tudou Holdings Inc. (NASDAQ: TUDO).

American Realty is up more than 67% at $10.05. Volume is already nearly 1 million shares traded. The commercial real estate company came public this morning at $6/share, along with a tender auction to purchase up to $220 million worth of shares at a price not higher than $11/share and not less than $10.50/share.

Pegasystems is up nearly 29% at $36.14. Volume is already about 4x the daily average of 241,000 shares traded. The business software maker beat earnings estimates last night.

James River Coal is up more than 15% at $6.61. Volume is already about 1.5x the daily average of around 2.4 million shares traded. The coal miner reported weaker-than-expected results, but forecast higher production for the current year..

Sauer-Danfoss is down more than -12% at $47.42. Volume is already nearly 1.5x the daily average of around 190,000 shares traded. The machinery maker reported lower profits last night.

Tudou is down nearly -13% at $13.98. Volume is already more than 3x the daily average of around 44,000 shares traded. The Chinese online video company reported better-than-expected revenues last night, but soaring costs led to a net loss.

Paul Ausick