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Foresight Energy LP: On The Sidelines Until Export Market Improves

By Roger S. Conrad on Jul. 18, 2014

Foresight Energy Partners LP (NYSE: FELP) filed its initial S-1 registration statement in February 2012, when the no-show winter had depressed natural-gas prices to less than $2.00 per million British thermal units, prompting utilities to switch away from thermal coal.

Today, cost advantaged US coal producers enjoy the most sanguine market conditions in years; surging natural-gas prices during the severe 2013-14 winter helped to alleviate the supply overhang of coal at utilities and should support prices this summer.

In this regard, the MLP’s initial public offering (IPO) couldn’t have been better timed.

But the recent track record of coal-producing MLPs, coupled with ongoing challenges on the regulatory from and from low natural-gas prices, partially explain why Foresight Energy Partners’ unit price has declined slightly since its IPO.

Foresight Energy Partners is the first coal producer to go public as an MLP since the inauspicious debuts of Oxford Resource Partners LP (NYSE: OXF) and Rhino Resource Partners LP (NYSE: RNO).

Whereas Rhino Resource Partners has managed to maintain its quarterly payout by not distributing cash on its subordinated units, Oxford Resource Partners suspended its distribution and is on the verge of being listed from the New York Stock Exchange.

Meanwhile, Natural Resources Partners LP (NYSE: NRP), which owns coal royalties primarily in Appalachia, slashed its distribution by 36 percent earlier this year in an effort to preserve liquidity for acquisitions and offset higher interest expenses related to recent acquisitions.

Fortunately, Foresight Energy Partners appears to have more in common with Alliance Resource Partners LP (NSDQ: ARLP), a coal producer that has managed to grow its distribution at an average annual rate of 11.9 percent over the past three years.

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