Three Coal Stocks Winning the War on Coal? WLB, ARLP, HNRG & JRCC

Obama's war on coal has claimed another victim as James River Coal Company (NASDAQ: JRCC) files for Chapter 11, but coal stocks Westmoreland Coal Company (NASDAQ: WLB), Alliance Resource Partners, L.P. (NASDAQ: ARLP) and Hallador Energy Co (NASDAQ: HNRG) have still managed to put in a decent performance for investors – despite the industry headwinds coming from the White House. Just consider this: By 2025, 300 of America's coal plants will close due to EPA policies for a total of 44,000 megawatts of generating capacity in 33 states to be taken off line. Moreover, Democrats have been putting up roadblocks to stop coal exports – one potential industry bright spot as the US has the largest coal repository in the world.

With that in mind, why are these three coal stocks succeeding (or at least still in business) while others like the James River Coal Company are failing? Let's take a closer look:

Westmoreland Coal Company. Founded in 1854, Westmoreland Coal Company is a US energy company having transitioned from predominantly eastern underground coal production to the company's current operations which include surface coal mining complexes in four western states and power operations in North Carolina. Westmoreland Coal Company employs approximately 1,400 people in seven states, is producing approximately 28 million tons of coal and generating 1.6 million megawatt hours of electric power annually. In mid February, Westmoreland Coal Company reported that 2013 revenues grew 12.4% to a record $674.7 million (a major portion of revenues comes from the long-term customers) while the net loss applicable to common shareholders decreased $2.5 million from 2012 to $6.1 million. The CEO commented:

"Our record results for 2013 were primarily driven by strong power demand, low hydro generation and favorable weather conditions that allowed our customers to dispatch at high rates. We are also very pleased that the Kemmerer Mine, which was acquired in January 2012, continued to perform beyond our original expectations."

It should also be noted that just before Christmas, Westmoreland Coal Company announced that it has entered into an agreement to acquire the Prairie and Mountain coal mining operations of Sherritt International Corporation for approximately $435 million. These operations include seven producing thermal coal mines in the Canadian provinces of Alberta and Saskatchewan, a 50% interest in an activated carbon plant and a Char production facility with the Chairman commenting:

"This acquisition will more than double our business. It greatly diversifies our customer base and expands our operations into Western Canada, widely considered to be one of the most attractive mining jurisdictions globally. The combined business will be the sixth largest North American coal producer, as measured by 2012 production. Additionally, the activated carbon and Char activities, although small in proportion to the coal business, represent value-added product streams and provide an expansion in the industrial environmental market and entrance into the consumer market."

On Monday, Westmoreland Coal Company rose 2.81% to $31.12 (WLB has a 52 week trading range of $10.77 to $32.00 a share) for a market cap of $462.04 million plus the stock is up 64% since the start of the year, up 185.2% over the past year and up 66.1% over the past five years.

Alliance Resource Partners. A diversified coal producer and marketer with significant operations in the eastern United States, Alliance Resource Partners is a master limited partnership with mining operations in Kentucky, Indiana, Illinois, West Virginia and Maryland. In late January, Alliance Resource Partners reported an 8.4% revenue increase to a record $2.2 billion for 2013 while net income increased 17.3% to a record $393.5 million. The CEO commented:

"Looking ahead, market dynamics continue to favor the Illinois Basin and Northern Appalachia coal markets and we remain encouraged that our strategy of expanding ARLP's presence as a low-cost operator in these regions will create growth opportunities in the future."

In the earnings call (whose transcript is available on Seeking Alpha here), the CEO was asked about potential export opportunities and commented:

"I mean we do see increased demand. Unfortunately, we're also seeing increased supply in the international marketplace. So the demand is there, it's just back to the supply in the international market place is going to influence the pricing. And right now, as we look at steam market exports, the opportunities in U.S. are better than they are in the export market…. However, we also believe that the prices over the next, say, 2 to 3 years will, in fact, be higher in the export market than they are today. A lot of that depends on what the world economy is and how China does, but we are spending time trying to study the export markets."

Alliance Resource Partners has a trailing P/E of 11.72 and a forward P/E of 10.11 plus a forward dividend of $4.79 for a 5.6% dividend yield. On Monday, Alliance Resource Partners rose 0.41% to $85.14 (ARLP has a 52 week trading range of $62.85 to $86.76 a share) for a market cap of $3.15 billion plus the stock is up 10.5% since the start of the year, up 33% over the past year and up 171.7% over the past five years.

Hallador Energy. Founded in July 1951 under the name of Kimbark Oil and Gas Company, Hallador Energy entered into a joint venture with Sunrise Coal, LLC in April 2006 and its primary focus changed from oil and gas production to coal production. Today, the largest portion of Hallador Energy's business is devoted to coal mining in the state of Indiana through Sunrise Coal, LLC (a wholly-owned subsidiary) serving the electric power generation industry plus the company has a 45% equity interest in Savoy Energy, L.P., a private oil and gas exploration company with operations in Michigan and a 50% interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana. However and in early February, Savoy Energy, L.P. announced it had engaged Energy Spectrum Advisors Inc (ESA) to market its Trenton Black River operated oil properties located in South East Michigan. Beyond that bit of news, Hallador Energy is usually quiet with the news as 2013 revenues came in at $153.87M verses $138.57M while 2013 net income came in at $23.15M verses $23.81M. Back in November, Hallador Energy was upgraded by Cowen and Co to "Outperform" from "Market Perform" with a $9 price target due to being underappreciated despite "attractive margins, prospects for future sales growth and financially sound position." Hallador Energy has a trailing P/E of 10.94 and a forward P/E of 10.42 plus a forward dividend of $0.16 for a 1.90% dividend yield. On Monday, Hallador Energy rose 2.82% to $8.75 (HNRG has a 52 week trading range of $6.42 to $8.99 a share) for a market cap of $251.12 million plus the stock is up 8.6% since the start of the year, up 25.2% over the past year and down 12.5% over the past five years.

Finally, here is a look at the long term share performance of James River Coal Company, Westmoreland Coal Company, Alliance Resource Partners and Hallador Energy verses the Market Vectors-Coal ETF:

As you can see from the above chart, the Westmoreland Coal Company, Alliance Resource Partners and Hallador Energy have all perked up lately while the Market Vectors-Coal ETF has trended downward.