Q1 2024 CONSOL Energy Inc Earnings Call

Participants

Nathan Tucker; IR; CONSOL Energy Inc.

Jimmy Brock; CEO; CONSOL Energy Inc.

Mitesh Thakkar; President, CFO; CONSOL Energy Inc.

Lucas Pipes; Analyst; B. Riley Financial, Inc.

Nathan Martin; Analyst; The Benchmark Company, LLC

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the CIEX first quarter 2024 earnings conference call. (Operator Instructions) This call is being recorded on Tuesday, May 7, 2024. I would now like to turn the conference over to Nathan Tucker, Director of Finance and Investor Relations. Please go ahead.

Nathan Tucker

Good morning, everyone, and thank you for joining us. Welcome to consult Energy's first quarter 2024 earnings conference call. Any forward-looking statements or comments we make about future events are subject to risks, certain of which we have outlined in our press release and in our SEC filings and are considered forward-looking statements within the meaning of Section 21E. of the Securities Exchange Act of 1934.
We do not undertake any obligations of updating any forward-looking statements for future events or otherwise. We will also be discussing certain non-GAAP financial measures, which are defined and reconciled to comparable GAAP financial measures in our 2024 first quarter press release furnished to the SEC on Form 8-K, which is also posted on our website. Additionally, we filed our 10-Q for the quarter ended March 31, 2024 with the SEC This morning.
You can find additional information regarding the Company on our website, www.consolidated.com, which also includes a supplemental slide deck that was posted this morning. On the call with me today are Jimmy Brock, our Chief Executive Officer; Mitesh Thakkar, our President and Chief Financial Officer; and Bob Braithwaite, our Senior Vice President of Marketing and Sales.
In his prepared remarks, Jimmy will provide a recap of our first quarter achievements and a detailed discussion of our operations. Natasha will then provide an update on our marketing and financial progress and our updated 2024 guidance and his closing comments Jimmy will recap our capital allocation progress and lay out our key priorities for the remainder of the year. There will be a Q&A session followed by the prepared remarks in which Bob will also participate.
With that, let me turn it over to Jimmy.

Jimmy Brock

Thank you, Nate. Good morning, everyone. In Shell, energy finished the first quarter with a strong operational performance and produced 6.5 million tonnes from the Pennsylvania Mining Complex, which was no small feat. Considering each of the three mines had a longwall move in the quarter. We're very proud of the PMC team for their efforts during these moves and for completing them safely and efficiently.
We continued our export shift and 65% of our Q1 '24 total reoccurring revenues and other income was derived from sales into the export market. We also continued to execute our strategy of returning value to our shareholders through share buybacks and deployed 89% of our Q1 '24 free cash flow toward retire and 440,000 shares of our common stock.
Before I move to the operational update, let me address the situation at Arkansas marine terminal, where vessel access to our terminal became blocked due to the collapse of the Francis Scott Key Bridge in Baltimore in late March, we'd like to again extend our condolences to all of those affected by this tragic. This event has limited our ability to ship coal into the export market and per multiple agency officials. This restriction is expected to continue through the end of May.
However, we have successfully developed alternative strategies to partially offset the impact. First, we've identified and work with domestic customers to improve their shipment volumes back. And our rail and logistic partners have stepped up and helped us quickly divert some of our export shipments to an alternative port in Virginia where we secured some incremental capacity, which has allowed us to move approximately 50% of our planned export volumes.
Until the permanent 50-foot draft shipping channel is reopened in the Port of Baltimore we expect to be operationally constrained. The good news is that we are still shipping tons into the export market, thanks to the cooperation of our rail and logistic partners, which has helped us partially mitigate the financial impact of the bridge collapse on our business.
Now let's discuss our operational performance in detail. On the safety front, our Itmann preparation plant had zero employee recordable incidents during the first quarter of 2024, our coal operations finished the quarter with a total recordable incident rate well below the national average for underground coal mines coal production at the Pennsylvania Mining Complex came in at 6.5 million tonnes in Q1 '24 compared to 7 million tonnes in the prior year period.
Production was lower due to the previously mentioned longwall moves in Q1 '24 compared to zero moves in Q1 '23 as a result of these longwall moves as well as ongoing inflationary pressures our PMC average cash cost of coal sold per ton for Q1 '24 was $40.29 compared to $33.61 in Q1 '23 Looking ahead, we expect to have only one longwall move for the remainder of the year.
Moving on to shipments during the first quarter of 2024, sales from the complex improved 193,000 tons of coal, including third party tons compared to 159,000 tonnes in Q4 '23. During the first quarter, all three operating sections continued demand, additional height for mains development, which requires cutting additional rock and slows mining rates. Furthermore, we continued to be impacted by equipment delivery issues with a major supplier and high employee turnover, which led to the advent of several production shifts throughout the quarter.
Given the recent pullback in met coal markets, we expect that employee turnover and supply chain bottlenecks could ease if we begin to see some supply rationalization. Despite these setbacks, we expect to complete our long-term mains development during the second quarter, which will allow us to operate the mining sections at more efficient mining Hides and improved production rates.
Moving to the console marine ton. Despite losing five days of potential vessel loadings, we achieved a throughput volume of 4.5 million tons during Q1 '24 compared to 4.6 million tons in the prior year quarter. Terminal revenues for the quarter came in at $24.5 million, and CMT operating cash costs were $7.2 million. Accordingly, CMT adjusted EBITDA finished at $16.8 million compared to $20.6 million in the prior year period.
With that, let me turn the call over to Mitesh to provide the marketing and financial updates.

Mitesh Thakkar

Thank you, Jimmy, and good morning, everyone. Despite some demand softness in the power generation markets due to mild winter weather during the first quarter, demand for our product remained strong in the export markets, specifically the industrial and crossover metallurgical markets as such, we continued to take advantage of our high quality product and sold nearly 60% of our total volumes into the export markets during the quarter.
From a revenue perspective, sales into the export market accounted for 65% of our total recurring revenue and other income. Conversely, domestic power generation sales accounted for 30% during 1Q '24. We sold 6.1 million tons of BMC coal at an average call revenue per ton sold of $68.33 compared to 6.7 million tons at $84.32 in the year-ago period. We continue to see a lot of interest for our product in the export markets.
This is evident in the fact that the disruption caused by the temporary closure of the Baltimore port. Most of our customers are focused on moving and deferring current shipments instead of canceling their shipments. So we believe the demand has been deferred not lost in the second half of 2024, we expect to increase the percentage of tons going into the export market compared to our projections when we began the year. Our ability to sell our PMC product into many different end use markets gives us significant flexibility to pivot tons between markets depending on demand strength.
We began 2024 initially forecasting to sell approximately 50% of our PMC volume into the export markets. However, due to reduced domestic demand and our ability to pivot, we now expect a more 60% or more under the stronger international markets in 2024 despite the temporary foreclosure in Baltimore. In fact, the port closure has limited high CV thermal exports and improved CFR India prices along with API two prices over the past several weeks.
Specifically, we have seen Indian retail inventories tighten due to these reduced high CV exports from the US and with the monsoon season about began, we expect these inventories to remain low when the restocking season kicks off. This could result in strong demand and pricing once the monsoon season ends.
On the crossover metallurgical front, we sold 508,000 tons of our PMC product into this market during 1Q '24 and continue to focus on penetrating new markets. Currently, we are seeing renewed interest for our crossover product, particularly in Southeast Asia, where demand is picking up on the domestic front, despite the near-term coal demand weakness due to mild weather that our long-term indicator for potential growth in domestic coal-fired generation demand.
The biggest driver for this demand in the U.S. is expected growth in artificial intelligence on top of the already growing power demand for electric vehicles, heat pumps and the manufacturing of microchips, EVs and batteries. The Wall Street Journal reports that AI servers could consume 6% of total US electricity generation by 2026, up from 4% in 2022.
The Journal also points out that the recent scientific study estimates that AI servers worldwide could consume as much power as a midsized economy like Sweden or the Philippines as early as 2027. Domestically, it has been reported that Samsung will double its semiconductor investments in Texas to $44 billion. Furthermore, a southeastern domestic utility has recently made the decision to build new power plants in order to serve the increased demand from new data center loads this new data center load will be serviced exclusively by natural gas coal and a small amount of batteries.
Same utility has also delayed the retirement of some of its coal-fired power plants in order to service this increased demand. Consistent with these domestic demand trends, we recently completed a fixed price three or done deal in the domestic market for 950,000 tons running from 2026 through 2028. We are also currently in negotiations with on other domestic utility for a long-term fixed price deal.
Now let me provide a quick update on our financial results before moving on to our 2024 guidance and outlook. This morning, we reported a strong first quarter 2024 financial performance we generated net income of $102 million or $3.39 per diluted share and adjusted EBITDA, $182 million. During the quarter we spent $42 million in CapEx, which resulted in approximately $41 million of free cash flow. We also deployed $58 million to our share buybacks and reduced outstanding debt by $4 million. Our free cash flow was impacted negatively by approximately $81 million of working capital changes.
Let me highlight a few items that resulted in this negative working capital impact. First, the timing of longwall moves in February and early March in bad our receivables collection during the quarter. Second, the closure of the Baltimore port resulted in our inability to ship approximately 450,000 tons of coal at the end of the quarter, which is now sitting in inventory. Despite these issues, we ended the quarter with a net cash position of $65 million and total liquidity of $478 million.
We continued to maintain strong liquidity of $502 million at the end of April as well as prudent capital allocation over the last few years, which prioritize debt repayment and bolstering liquidity has significantly improved our ability to manage through a multi-month restriction on moving our export volumes. Since our spin-off, we have increased our unrestricted cash and short-term investments by more than $100 million and reduced our annual debt servicing costs by more than $60 million. In other words, we have significantly reduced the fixed cost in the business while simultaneously improving our liquidity and financial flexibility, which gives us comfort in managing through the domino disruption.
Before moving on to guidance, let me provide some perspective on the impact of the Baltimore port closure and how it will drive our outlook for 2024. As Jimmy mentioned, we are restricted in our ability to export coal and working with our customers and logistics partners. We are currently able to move approximately 600,00 to 800,000 export tons per month from an alternate port compared to a typical 1.2 million to 1.5 million tons per month of our PMC product to Baltimore.
We expect the situation to continue through the end of May, assuming there are no restrictions at the Baltimore port beginning in June, we will work to not only resume our historical average throughput rate but to potentially make up for the lost throughput tonnage from April and May. Accordingly, we are adjusting our production guidance to reflect that assumption, starting with the PMC due to the bridge collapse, we are reducing our 2024 sales volume to a range of 24 million to 26 million tons from the previous range of 25 million to 27 million tons.
Our BMC. mines were running very well under the bridge collapse and continue to run well on the current reduced schedules. Our marketing team has also done a good job to quickly secure spare port capacity in preparation for the port reopening. The CMT team has focused these past few weeks on completing the planned shutdown projects. While we ship PMC ton stockpile at the terminal. Our plan is for the CMT to then reduce the duration of its typical shutdown period and ship coal from the stockpile. While the mines and railroads go through the summer maintenance shutdowns.
On the pricing front, we are maintaining our average core revenue per ton sold range of $60 to $50 to [$60] $50 holding this range despite the increased shipping costs of the export tons that pivoted to our junior Board reflects the improved API to benchmark pricing compared to earlier this year when the guidance range was initially set, given the reduced tonnage range and lower fixed cost distribution benefit in April and May.
We are increasing our PMC average cash cost of coal sold guidance to $37.50 to $39.50 per ton, an increase of $1 per ton on each end of the range. But our Itmann mining complex, we are increasing our sales volume guidance to a range of 700,00 to 900,000 tons from the previous range of 600,000 to 800,000 tons.
On the cash cost front, we are suspending our average cash cost of coal sold per ton guidance at the Itmann mining complex due to the continued significant equipment delivery delays, reduced manpower and the evolving mix of mined purchased and processed gold at the complex.
Lastly, on the capital expenditures front, in an effort to partially mitigate the effects of the bridge collapse, we are reducing our CapEx guidance range by approximately $20 million to a range of $155 million to $180 million from the previous range of $175 million to $200 million.
With that, let me turn it back to Jimmy.

Jimmy Brock

Thank you, Metcash. Let me now provide an update on our shareholder return progress. We deployed approximately 89% of the free cash flow generated during the first quarter towards repurchasing shares of our outstanding common stock. In total through April 2024, we deployed $37 million of our Q1 '24 free cash flow towards repurchasing 440,000 shares of CEIX. common stock at a weighted average price of approximately $84 per share.
Since restarting our share repurchase program. In late 2022, we've retired 6.1 million shares or approximately 18% of our public float. As we have mentioned, we remain dedicated to returning value to our shareholders through our capital allocation framework. We continue to believe that the demand for our high-quality coal and the export industrial markets will be stronger from much longer than we're given credit for. We also believe that our long-term contracts provide us with strong revenue visibility.
As such, we continue to believe that share buybacks are the best use of our capital as always, we will continue to analyze this and prioritize the highest rate of return moving forward to the remainder of 2024, our major focus will be on mitigating as much of the reduced export tonnage due to the bridge collapse as passed. Customer demand in the export markets has remained strong, and we have had constant communication with our customers to work through the delays and move shipments around.
We continue to work closely with the Coast Guard and local authorities to open the ship online as soon as possible. As Mahesh mentioned, we have a plan to accelerate our summer maintenance work at the CMT. in conjunction with free shipping coal to the terminal to allow to hit the ground running when the shipping line opens. This will also allow the CMT to continue shipping throughout the shutdown period when the railroads and mines were closed for maintenance work.
Before turning over the call, I want to thank our employees for their timely reaction to the accident and bottom line. Cmt team jumped into action, working with local authorities and developing plans to accelerate maintenance. Our mining operations quickly pivoted to maximizing efficiency and optimize their operating schedules. Our marketing team leveraged the strong relationships we've built with our transportation partners to secure some incremental capacity as an alternative export facility as well as reroute trains to this port.
Finally, the entire team across the board has been focused on managing as much spend as possible to help partially mitigate the financial impact until the Port of Baltimore is reopened. It is our team's dedication and hard work that allow us to so quickly manage through these unforeseen challenges that inevitably happen in this business.
With that, I'll hand the call back over to Nate for further instructions.

Nathan Tucker

Thank you, Jamie. We will now move to the Q&A session of our call. At this time, I'd like to ask our operator to please provide the instructions to our callers. Operator, can you please provide the instructions?

Question and Answer Session

Operator

(Operator Instructions) Lucas Pipes, B. Riley Securities.

Lucas Pipes

Thank you very much. Good morning, everyone. Good job managing our Q1 and also the impact of the tragedy. But my first question is on the is on the Q2 outlook on Metcash, you mentioned a few moving pieces. Cash and liquidity balances at April. I hadn't had the time to do the math and what this means for your cash flow here. But maybe you could walk us through various moving pieces, both from a P&L perspective, volume perspective, cash flow perspective in Q2 and then also for the remainder of the year.

Jimmy Brock

Thank you, Lucas. Let me start out with with the volume. So if you look at who we currently said, we moved about 1.4 million tons in the month of April. So if you assume close to the same in May and then, you know, some of the unknowns, if the court opens up earlier, obviously given an opportunity to move more or if it's later less, but just assume we hit the end of May and then we're on track for May. My estimate for volume and talking to the team here daily is we should approach somewhere approximately near 5 million tons providing the best port of Baltimore does reopen at the end of May.

Mitesh Thakkar

And Lucas, just on the cash flow perspective, we gave you some some numbers to think about from a liquidity perspective, I think and for the month of April, we generated about $20 million of free cash flow. Now that does not include the inventory at the Port of Baltimore still that we expect May to be a little bit lighter.
But we are optimistic that we should be in a position to generate free cash flow, assuming the board opens in time but lot of moving parts on some of the restrictions that are opening and those kind of things. So it's hard for me to give you exact guidance on Q2, but and that's how I would think about it, Tom, we went into May with a little bit of a free cash flow generation in April, May might be a little bit lighter, June should recover.

Lucas Pipes

Got it. Thank you. And just a quick follow-up. So on the on the 5 million tonnes of volumes or so, does this assume a and of really quick on restarted Baltimore out of it. And so now just shipping channel opens you more or less back back to normal? And does it assume kind of a gradual ran into into June as now that the port operations kind of gear up the learning device,

Jimmy Brock

Lucas, one of the things that we're taking advantage of while we have the port idle here is moving forward some of the maintenance things that we were planning on doing in the shutdown. So we'll have that terminal ready to go on June 1. And as Matthias mentioned, we have about 450,000 tonnes of inventory there that's ready to go.
So as Bobby has our customers lined up in the shipment, I think we can start rather gate on June first, move in everything that we plan and what we don't know the unknown there is what will happen and how will we be allowed to enter and exit the port will have a new safety restrictions that we don't know.

Mitesh Thakkar

But we expect to ship, you know, normal in June out of the port and of everything that we have learned so far from the authorities as well. It seems to be like that normal shipment will resume 1st of June as what our thought processes. And remember, we don't have to we are not constantly accessing the channel. As you know, once the vessel calls and for next, let's call it 30 to 40 hours. We have not been calling it.
And then it leave.
So it's not a constant access for us, but that's something to think about as well.

Lucas Pipes

Very helpful. Thank you all for the detail. And for my second question, I wanted to touch on your contract bookings and pricing in 2024 and 2025, would you be able to provide a breakdown between your fixed and kind of variable part pricing commit volume commitments rather again, '24, '25. How much do you expect to sell domestically versus exports? And what is the pricing sensitivity on on the terms that are not solely hopefully priced here on a on a fixed basis.
Thank you very much.

Jimmy Brock

Morning, Lucas. I'll give you the full breakdown for 2024. We'd have about [2.3], that's index-linked power. Our exports of [11.5] sitting here today, of which about [6.9] are linked to the indices are mainly API. to we have small amount for petcoke and then obviously our high-vol B crossover on index-linked deals as well.
And then about [9.1], our domestic and fixed price, I would tell you the balance of the tons we have left to sell, I would anticipate going into the export markets. While we did just over 500,000 tons of crossover in Q1, Q2 will be a little lighter, mainly again because of the the channel issue.
But I would expect to get back on that progress for Q3 and Q4. I'm just sitting here today. We're looking at pricing, call it mid-60s, and we're basing that off of $110 a PI. to price for the April through December period. And based on what we have left to ship. The current sensitivity for every dollar change is about $0.12 per ton across the entire portfolio.
And then when you move on to 2025. As you noticed, we increased our book by about 500,000 tons since last quarter. All of that is now was sold into the export market. So we now have [2.5] linked to power up [5.9] is domestic and fixed and [5.1] is export and all of it's tied to indices. All has floors and ceilings associated with those as well.
If you assume a 26 million production rate for 2025, which has typically been our midpoint of the current sensitivity, there would be $0.14 for every dollar change in API. two, and we're basing that off of a $100 API two price in 2025. And with that said, with the volume, we have $13.5 million. Our average pricing sitting here today is in the mid-60s.

Lucas Pipes

Thank you. Thank you very much for that part sensitivity of $0.14 for next year, does that make assumptions around where the remaining uncommitted volumes are going?

Jimmy Brock

It does not sell right now. That's just based on the 5.1 million tons that we currently have under contract. And then assuming the balance would be sold under a fixed price arrangement, whether it be export or domestic. And again, based on a 26 million ton midpoint range.
Got it.

Lucas Pipes

But if I were to assume for example, that you double your exports under similar pricing arrangements than would it be fair to assume I kind of double that sensitivity to it go to as well.

Jimmy Brock

Correct.

Lucas Pipes

Okay.
That's very helpful. I really appreciate all the color and best of luck with the support reopening and keep up the good work.

Jimmy Brock

Thanks, Lucas.

Operator

Nathan Martin, The Benchmark Company.

Nathan Martin

Thanks, operator. Good morning, guys and great job, and I want to thank you. Let's talk about price first, price per ton in the first quarter above full year guidance. Maybe can you talk about some of the drivers there? What led to that result?

Jimmy Brock

Yes, Nate, I mean, couple of things. Number one, we had a pretty strong January as it relates to our netback contracts that certainly had had boosted on the pricing in Q1. Api two is slightly higher than what we had in our original forecast. And then the balance would be just the mix of the volumes, we end up sending selling a little bit more into the crossover market than what we had originally projected.
And as I mentioned, you know, our thought going forward in Q3 and Q4, and we'll continue on that pace. If you think about where our pricing guidance, we have not changed that. One thing I think is important to note is the volumes we're moving down through Norfolk today are costing us roughly about $10 more per ton.
So the fact that we're moving all this volume through Norfolk incurring the additional costs and still maintaining our guidance range. It gives us a lot of confidence going forward on the tons that we have left to sell the crossover markets as they are today. And also were the API. two prices.

Nathan Martin

And Bob, you kind of touched on what was going to be my next question. So it sounds like again, you guys reiterated full year price per ton guidance despite that higher transportation cost, which I think you said was $10 a ton. So if we think about now how much price per ton would have actually increased versus prior guidance absent that drag, is that a way we can look at it just kind of on their pull that $10 per ton difference out?

Jimmy Brock

Yes, maybe think about what Mahesh mentioned, we're moving roughly 600,000 to 800,000 tons a month through Norfolk. So call it the midpoint, 1.4 million tons, $10, it's $14 million. So we're losing I wouldn't say losing, but the opportunity loss is roughly $14 million.

Nathan Martin

Okay. Got it. Appreciate that, Bob. And maybe it's just a question on the cash return policy. Jimmy, you touched on this obviously in your prepared remarks, but it returning 89% of first quarter free cash flow to repurchases. I think it was 85% last quarter.
Obviously each quarter ahead of your target, which is around 75%. Is this a pace we should kind of expect you guys to continue or is this more of a case of just I think, Jim, as you alluded to returns looking better for buybacks right now versus other investments, this would be great to get your thoughts there as well?

Mitesh Thakkar

Yes.
Thank you.
Kind of answered your own question, but what we do is we look at it and as we've said, we redeploy that capital back to the highest return. And today, as we look at the yields on both, it is share repurchase that that's the highest return, but that could change as far as the percentage goes, we've told everyone that we're going to place 60% or 75% of our free cash flow toward share buybacks.
As we look at the quarter and we look at where we are and opportunities that we had in the market. And that number could be higher as it was this last quarter, whenever we feel like our share price is undervalued took an opportunity of the excess free cash flow and everybody got it out at least moving forward.

Nathan Martin

Perfect. And maybe one final one. I hate to be maybe a little bit more on the negative side. But as we think about the Baltimore terminal reopening and hopefully here by the end of May, for whatever reason the schedule gets pushed out, what kind of contingencies you guys have in place if that main channel doesn't reopen for one week two weeks, whatever the case may be beyond and have made, you still have the alternative transportation in place going into June available to you and just to be great to get some more color there.

Jimmy Brock

Yes, we do, Nate, our transportation partners really stepped up during this time to really give up to really assist us in and they're there for us as long as we need them. Obviously, it's a better move to go from our Bailey mine to Baltimore versus down in Norfolk, but they're here to support us on. We've had long-term partnerships with them. Obviously, the longer the Baltimore port is out the more we'll be constrained but does the 600,000 to 800,000 tons a month I think is is still achievable through June.
Should this port, you know, people a channel reopening be delayed, but the good news too is, as we mentioned, our terminal took advantage of the time to get their outbound maintenance done. So our goal again, would be to make up as much volume as we possibly can into the first week of July when typically that would be our shutdown.
So we'll continue to keep the terminal stuff and the volumes still there. We haven't lost one vessel as we sit here today. So all of that everything has been deferred and we continue to get emails daily from our customers at, you know, asking when this port is going to reopen because they want to get their vessels loaded ASAP. So again, good news there, and we'll continue to utilize the the Norfolk port so long as we need to.

Nathan Martin

I thank you guys, very much. Appreciate that. And the time best of luck in the second quarter.

Jimmy Brock

Thank you.

Operator

Lucas Pipes of B. Riley Securities.

Lucas Pipes

Sorry, I was on mute. Thank you very much for taking the follow-up questions. I wanted to ask on on fitment, if you could update us on on the equipment delays if there's an update from the vendor when that situation is expected to improve and then also kind of longer term, where would you expect those costs to shake out?
Is the prior guidance still the best kind of yardstick or would you expect some increases from there on maybe you still see further improvements once a month fully up and running, but would appreciate your thoughts on that.
Thank you.

Jimmy Brock

Yes. So on the equipment delays, Lucas, we do have one thing that's going to help us hopefully here by the end of June or the first week of July. We do have some two pieces a week. We had equipment coming back to us that should help us. Those are both the m. units, but we keep getting delays on our new units that are coming, which we really need because by that time, we're going to have the mains development complete and we can put those new machines in these gates.
As far as the costs, no, we're we withdrew the guidance because we want to have more certainty around what we give. And there's two things that's really heartening and run that one is the equipment. And the second is the labor is the manpower. So if we get those back or not, Alan, these sections and we have the equipment, the people there were then I think we can give guidance.
My expectation is to be within the guidance that we provided earlier and then be very similar to what others are running in Central App. I still feel really good about the project, which is great quality. We have to get labor there and equipment. And it's been a challenge for us. I mean, we're working every day at it. We have job fairs and we are getting closer to where we want to be, but we're not there where we can run 100% of the time. I mean, works. We've got anywhere from 25% to 40% of our ships up.

Mitesh Thakkar

So it's hard to give guidance on Lucas, another variable I would add is we are buying a lot of purchased coal as well. As you know, we build a prep plant with additional capacity. And if you look at some of the sales volume that we provided for the fourth quarter, I think there was a fair amount of purchase volume and it brought probably 40% to 45%. And so from that perspective, I would say, and once we have a better view on how the purchase volume shakes out longer term as well, that will also determine that cost guidance.

Lucas Pipes

Yes, very helpful. Thank you. Again, I want to first circle back on the pricing comments from earlier, and I wondered if you could maybe specifically comment on the domestic market and and how how how the pricing is holding up there on the backdrop of acutely weaker gas prices curve is obviously stronger, but how are those conversations going as you look out to 2025 and maybe beyond what's the appetite bound to procure to procure tungsten? And how would those prices compare to the netbacks you could realize in the export market? Thank you for that perspective.

Jimmy Brock

Yes, I mean, there certainly was a lack of winter for sure this year again on and are most of our customers are well stocked heading into the shoulder months that we're experiencing now. But I will tell you that, you know, hearing from many there are they are expecting a strong summer burn and that should translate into some strong demand in the third quarter.
I will tell you, Ms. Mahesh mentioned we did secure 950,000 tons into the domestic market. That volume was for 2026 through 2028 on the pricing we secured, there was pretty much in line with what the published marks are today.
And we're also in negotiations for some additional volumes on beginning in 2025 through 2028. So when you look at the gas forward curve, which is what we do. And I think a lot of our customers do as well on you. Could you could kind of back-calculate what I would a reasonable, I'll say, mine prices, which the forward curve, I think is pretty spot on as it sits there today.

Lucas Pipes

Thank you. Thank you very much. On a high-level question to end from my side on the the recent final rule on the the Clean Power Plan, what do you think this means for US coal generation? If it were to to hold up in court on it, how do you kind of square that with what you're seeing on the demand side, some tech centers and touch on would appreciate the thoughts on that. Thank you.

Jimmy Brock

Yes. Well, the first one that has the greatest amount of concern is the clean power or the Clean Power 2.0 carbon rule. Obviously, they have no deadlines out there and you can either decide you're going to retire the coal-fired plant and run longer or you can make the upgrades with the carbon capture and being allowed to run to a longer period.
So to me, Lucas, the big thing is about where are we going to get the power needed? If the rule goes in, as is my expectations is there be a lot of litigation? I know it's already been talked about among trade associations and others. But the American people that are listening should be really worried about this because we are headed for a grid collision. I mean, power demand is moving in the exact opposite way. And then we're forcing these coal-fired plants to retire at an accelerated rate. If this clean power plan goes through as the regulations are stated on April 24.
So to me, it has some concern. And I think it would be probably later in this decade before you started to see any of the directions going to go. So I think we have some time, but the way the rules are out today is now and they may where it has to be all the American people about where they don't get electricity from what the demand rates come in as they are.

Lucas Pipes

Jimmy, I really appreciate, Tom your perspective again, keep up the good work best of luck.

Jimmy Brock

Thanks.

Operator

We don't have further questions at this time. Presenters, please continue.

Nathan Tucker

Thank you. We'd like to thank you all for your participation this morning and for your support, Arkansas energy we hope we answered your questions and we look forward to speaking with you on our next earnings call. Thank you.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.