Iene022712b 220429

U.S.
Research
Published by Raymond James & Associates
February 27, 2012
Energy
Industry Brief
James M. Rollyson, (713) 278-5254, Jim.Rollyson@RaymondJames.com
David P. Feaster, Jr., Res. Assoc., (713) 278-5248, David.Feaster@RaymondJames.com
Energy: Stat of the Week _______________________________________________________________________________________
Will $2.50/Mcf Natural Gas Give the Coal Industry Gas Pains?
As our natural gas model continues to evolve, so too does our outlook for domestic coal demand. With our recent U.S. natural gas
price estimate reduction to $2.50/Mcf from $3.25/Mcf, we have increased our coal-to-gas switching estimate to approximately 2.6
Bcf/d in natural gas terms (or roughly 65 million tons of coal, plus another 10 million tons for a weaker electric generation outlook).
On a purely economic basis, we think the potential for switching is clearly meaningfully higher at the current price of natural gas.
However, structural challenges and, more importantly, coal contracts are likely to keep the actual amount of market share gain by
natural gas utility plants moderated in the short run. As we demonstrate in this note, the pure economics based switching potential
is highly sensitive to natural gas prices. Thus, if our 2013 and long-term natural gas price forecasts of $3.25/Mcf and $4/Mcf are
accurate, the switching potential will drop significantly under the 2011 delivered fuel cost scenario. Moreover, we also expect the
coal industry to respond in kind with production cuts necessary to offset at least most of the near-term demand loss, especially
considering current spot prices that reside below cash costs.
Economics 101 cheap natural gas is giving the coal industry heart burn
The current abundance of U.S. natural gas is clearly giving the coal industry its share of heart burn lately. The recent decline in
natural gas prices back into the sub-$3/Mcf range is wreaking all kinds of havoc in terms of investors, utilities, and coal producer
minds alike. Simply stated, weak natural gas prices vis--vis delivered coal prices would indicate that a fairly high percentage of coalfired plants are currently fair game to be dispatched ahead of natural gas-fired plants. Moreover, the warm start to the winter
season is further exacerbating the problem as total electric generation is currently running down 8% year/year through the first six
weeks of 2012, further adding to coal producers woes. If we look purely at simple economics, natural gas prices hovering around
$2.50/Mcf (which also happens to be our forecast for average 2012 natural gas prices), implies that as much as 12.7 Bcf/d equivalent
of coal-fired demand could be displaced by natural gas generation. The chart below details this concept based on 2011 actual
delivered fuel costs to coal-fired utilities on a $/MMBtu basis. Note that this compares to the 2011 average natural gas price of
roughly $4/Mcf (our long-term average price assumption), which implied about 2.5 Bcf/d of potential switching, compared to the 1.5
Bcf/d of switching that we calculate actually occurred. Our 2013 estimated natural gas price of $3.25/Mcf is also included for
comparison, reducing the potential switching amount to an equivalent of 6.6 Bcf/d.
Implied Coal-to-Gas Switching Potential At Various Delivered Fuel Costs
Coal Burn in Natural Gas Equivalents (Bcf/d)
40
Import
35
INT
WBIT
30
APP
25
PRB
20
15
2013E of $3.25/Mcf
= 6.6 Bcf/d
10
5
2012E of $2.50/Mcf
= 12.7 Bcf/d
LT Avg & 2011A of

$4/Mcf = 2.5 Bcf/d
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
$3.40
$3.60
$3.80
$4.00
$4.20
$4.40
$4.60
$4.80
$5.00
$5.20
$5.40
$5.60
$5.80
$6.00
$6.20
$6.40
$6.60
$6.80
$7.00
Source: EIA, RJ&A Estimates
Please read domestic and foreign disclosure/risk information beginning on page 9 and Analyst Certification on page 9.
2012 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters:
The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
Raymond James
U.S. Research
Taking this one step further, if we were to run approximate economics on an output cost basis, rather than simply a delivered fuel
input cost basis, the problem looks a little worse. As shown in the table below, when accounting for recent spot coal and natural gas
prices, the all in cost ($/Mwh) to operate a coal-fired power plant burning different types of coal appears more expensive than
running a combined cycle natural gas plant (~7,000 heat rate), assuming $2.50/Mcf natural gas prices. When running a less efficient
natural gas peaking plant (~10,000 heat rate), only a PRB-fueled coal-fired power plant comes out ahead, and even that depends on
the proximity of said plant to the PRB (Powder River Basin) region (as transportation costs represent a higher percentage of the total
delivered cost of fuel). The moral of this story is that just based on the current input costs of coal and natural gas, the natural gas
plant would win out in most cases under the current relative pricing environment we are living in today with natural gas prices at
$2.50/Mcf. But simple economics are not the only factor to consider.
Comparative Generation Dispatch Costs

$35.00
Dispatch Cost ($/Mwh)
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
CAPP
NAPP
ILB
Gas Peaker
PRB
CC Gas
Source: Raymond James Estimates
Contracts, other factors providing some relief to gas pains

Looking beyond pure economic factors, there are many other pieces to the coal-versus-gas switching puzzle that come into play in
the short run. For starters, if one utility owned every coal and natural gas plant in the U.S. and they were all hooked up to the same
grid, dialing up natural gas plants and throttling back coal-fired plants would be a much easier exercise. The reality, however, is that
there are multiple owners of various power plant assets, which are also connected to different grids. Moreover, the utility plant
owners all have their own unique mix of generating capacity. Finally, there are also regulated utilities that march to the beat of a
different drummer and not just simple short-term swings in cost inputs/economics.
Another significant near-term factor to consider is coal supply contracts that are in place with various utilities/producers. Unlike the
high percentage of oil and natural gas that gets sold on the Nymex futures market, over 90% of coal is still sold through supply
contracts between producers and utilities, often at durations that span across multiple years. With only a handful of publicly traded
coal producers yet to report year-end 2011 results (that represented about two-thirds of total U.S. production in 2011), it appears
that over 96% of estimated thermal coal production volumes are currently committed and/or priced for 2012, based on current
production expectations. As most producers managed to contract additional volumes during 4Q11, we would expect that figure to
creep a little higher during the remainder of earnings season. From there, if we were to assume that: a) no further un-contracted
volumes are sold for the remainder of the year (given the weak natural gas market and initial electric generation trends); b) all of the
contracted volumes actually get shipped during the course of the year; and c) the remaining private producers (which represent
about 30% of the market) are in a similar contract position, then we are looking at total likely switching capacity in 2012 of around
3.2 Bcf/d (or roughly 80 million tons of coal). On the flip side, if we were to assume that producers hit the minimum anticipated
production volume guidance for the year, the total amount of incremental switching is closer to 2.0 Bcf/d (or roughly 50 million tons
of coal. We suspect the right answer is somewhere in the middle, which is why were modeling 2.6 Bcf/d (or about 65 million tons
of coal) for full-year average coal-to-gas switching gains.
Raymond James
Producer
Arch
Alliance
Alpha
Cliffs Natural Resources
Cloud Peak
Consol
James River
Oxford
Patriot
Peabody
Rhino
TECO
Walter
Total
U.S. Research
Committed
128.8
33.2
90.8
0.5
94.3
49.7
7.9
8.4
20.0
200.0
4.1
3.2
4.3
645.1
Thermal Coal
% of Total
90.7%
99.1%
97.6%
95.0%
98.7%
98.7%
68.5%
97.0%
97.1%
100.0%
94.3%
90.0%
100.0%
96.6%
2012 U.S. Coal Contract Positions

Metallurgical Coal
Total Est.
Committed
% of Total
Total Est.
142.0
5.1
56.7%
9.0
33.5
0.3
25.0%
1.0
93.0
18.7
84.9%
22.0
0.5
3.7
60.0%
6.1
95.5
50.4
3.8
36.5%
10.4
11.5
0.0
0.0%
3.0
8.7
20.6
5.3
71.6%
7.4
200.0
4.4
0.5
100.0%
0.5
3.6
3.2
90.0%
3.6
4.3
9.3
75.0%
12.4
667.8
49.8
66.1%
75.4
Committed
133.9
33.5
109.4
4.1
94.3
53.5
7.9
8.4
25.3
200.0
4.6
6.4
13.6
695.0
Total Coal
% of Total
88.7%
97.0%
95.2%
62.7%
98.7%
88.1%
54.3%
97.0%
90.4%
100.0%
94.8%
90.0%
81.4%
93.5%
Total Est.
151.0
34.5
115.0
6.6
95.5
60.8
14.5
8.7
28.0
200.0
4.9
7.2
16.7
743.3
As of
4Q11
4Q11
4Q11
4Q11
4Q11
4Q11
3Q11
3Q11
4Q11
4Q11
3Q11
4Q11
4Q11
2012/2011
2011 Volume Chg
162.4
(11.4)
30.8
3.7
123.3
(8.3)
5.0
1.6
97.1
(1.6)
62.6
(1.9)
13.2
1.4
8.1
0.6
31.1
(3.1)
203.9
(3.9)
4.7
0.1
8.1
(0.9)
10.4
6.3
760.7
(17.4)
Source: Company Reports, RJ Estimates
We have a couple of caveats to this analysis. There have been reports of producers being asked by utilities to defer the timing of
some shipments this year to later months, particularly given the decline in year/year generation as a result of the mild winter. If
these volumes are not made up by the end of the year, switching could be somewhat higher. Likewise, if utilities fully abide by their
contractual obligations but do not burn all of the coal they receive, switching could also be higher. As noted earlier, the flip side
would be that if producers are able to reach the minimums of production volume guidance, switching would only grow by
approximately 2.0 Bcf/d.
Historical coal to gas switching sums up to ~3.6 Bcf/d since 2009
The entire coal vs. gas switching discussion began in 2009, when natural gas prices started to dip below coal prices (on the margin)
for the first time. Due to a struggling economy and additional contribution from less cold weather, electric generation declined by
more than 4% for the year. Because of meaningfully softer natural gas prices, we switched approximately 2.1 Bcf/d of coal
demand to natural gas, peaking in the month of September as natural gas prices fell below the $3/Mcf threshold (averaging around
$4/Mcf for the year). With a rebound in the economy and easy weather comps, electric generation rebounded by more than 4% in
2010, but the level of switching ended relatively flat for the full year with 2009 levels. A much more muted market in 2011 (both for
natural gas prices and electric generation) led to further implied coal-to-gas switching, to the tune of 1.5 Bcf/d with data through
November. Thus on a cumulative basis, the natural gas industry has picked up approximately 3.6 Bcf/d of demand at the expense of
the coal industry since the start of 2009. As indicated in our graph on the front page, the entire coal generating fleet (based on 2011
generation levels) equates to about a 37 Bcf/d market in natural gas terms.
Implied Coal-to-Gas Switching
1.5
2009 Avg = 2.1 Bcf/d
2011 Avg = 1.5 Bcf/d
0.5
-0.5
2010 Avg = 0.0 Bcf/d
-1.5
-2.5
-3.5
-4.5
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
YOY C/G Switching (Bcf/d)
2.5
Source: Energy Information Administration, RJ&A Research
To add insult to injury, year-to-date U.S. electric generation is off to a terrible start, given mild weather
Although the primary topic of this note is coal-to-gas switching, we would be remiss in not mentioning the fact that extremely mild
weather conditions thus far in the year have led to a massive year-over-year decline in electric generation. Through the first six weeks
of the year, electric generation in the U.S. is down some 8% over the same time frame in 2011. We obviously dont expect this trend
to hold true for the full year, but given current weather forecasts, mild weather is expected to persist for the remainder of the
winter. This compares to our initial 2012 electric generation estimate of a 0.5% decline for the year. When factoring in the year-todate weakness, further mild temps into March, a 0.5% decline in the shoulder seasons and summer months as well as some rebound
in November/December (on easy comps), our full year electric generation estimate now falls to a decline of 1.1% over 2011.
Raymond James
U.S. Research
U.S. Electric Generation
105,000
2010
100,000
2011
95,000
2012
MMKWh
90,000
85,000
80,000
75,000
70,000
65,000
Week 52
Week 49
Week 46
Week 43
Week 40
Week 37
Week 34
Week 31
Week 28
Week 25
Week 22
Week 19
Week 16
Week 13
Week 10
Week 7
Week 4
Week 1
Source: Edison Electric Institute
When we combine ~65 million tons of coal demand lost from coal-to-gas switching and tack on another ~10 million tons from purely
year-over-year electric generation declines, less than about a million tons of growth from the industrial/steel part of the equation,
we estimate full-year 2012 coal demand to decline by 75 million tons.
Will there be enough coal production cuts to offset demand declines?
As noted in the table on the top of page 3, when we add up current production plans for 2012 by the publicly traded U.S. producers,
relative to actual 2011 production levels (adjusted to normalize M&A activity concluded during 2011), the total implied year-overyear production declines by the U.S. public producers is nearly 17.5 million tons. This includes some growth in domestic
metallurgical coal production and does not include potential cuts from the few producers that havent reported yet. Given some
remaining un-contracted coal, wed expect the public guys to reduce production levels by a bit more before year end. Meanwhile,
we suspect the private coal producers (that represent ~30% of total U.S. production) are likely to contribute an even greater amount
of cuts (mainly in the east), given an assumed relative cost disadvantage. Note that unlike the oil/natural gas business, coal
producers actually have to spend money each and every day in order to get coal out of the ground. Therefore, if the market remains
weak and current spot prices remain at levels that imply negative margins (as they do for many producers in Appalachia and even in
the PRB producers at present, using Nymex prices), production will get cut.
CAPP Coal Prices vs. Cash Costs
$25
$140
$100
$80
$60
$40
CAPP Cash Costs/Ton

CAPP Prices
RJ 4Q Cost Estimates
$23
$21
PRB Prices ($/ton)
CAPP Prices ($/ton)
$120
PRB Coal Prices vs. Cash Costs

PRB Pricing
PRB Cash Cost/ton
$19
$17
$15
$13
$11
$9
$7
$20
Source: Company Filings, Thomson Reuters, RJ Estimates
$5
Source: Company Filings, Thomson Reuters, RJ Estimates
Looking back at history to get some idea how the current situation may play out suggests were due to see pretty significant cuts. In
2009, for example, the industry shed nearly 100 million tons of supply (or over 8%), as shown in the left hand graph below. We
suspect supply will get cut again this time around by enough to come at least close to offsetting demand and therefore keeping
inventories from ballooning to the degree they did in 2009. One major difference between the current market outlook and what
occurred in 2009 stems from the U.S. coal export picture. Expectations are that U.S. coal exports will remain fairly steady in 2012
(with a couple large players expecting slight growth), compared to a pretty significant decline (22+ million tons) in 2009 (shown
below) that helped drive a ~40 million ton rise in stockpiles. Either way, were certainly not done with production cuts if the weather
remains mild and if natural gas prices remain as weak as we think, causing coal to get displaced at the expense of natural gas.
Raymond James
U.S. Research
U.S. Coal Export Growth/Declines

YOY Production Change (MMtons)
YOY Production Change (MMtons)
U.S. Coal Production Growth/Declines

40.0
20.0
0.0
(20.0)
(40.0)
(60.0)
(80.0)
(100.0)
Source: EIA
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
24.5
14.5
4.5
(5.5)
(15.5)
(25.5)
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: EIA
As a result, we estimate that around 50 million tons of U.S. coal production will be trimmed when all is said and done in 2012. Of
that, we expect nearly half of the reduction to occur in the PRB, where there are currently a little over 30 million less tons
committed for this year versus what was actually produced/delivered in 2011.
Bottom line
The picture is far from pretty for the U.S. coal markets right now, based on the combination of cheap natural gas-induced
competition and mild weather as the icing on the cake. Although the potential for coal-to-gas switching could approach 13 Bcf/d at
our $2.50/Mcf average natural gas price estimate, we think contract commitments as well as other logistical constraints will keep
the actual amount of switching far below this figure. As noted, we now estimate full calendar year coal-to-gas switching of ~2.5
Bcf/d, or about 65 million tons of U.S. coal demand based on current and anticipated coal contracts that we assume will actually be
honored. We add another ~10 million tons of coal demand hit being taken due to the weak year-to-date start in electric generation
trends to total 75 million tons of overall U.S. coal demand declines in 2012. On the bright side, were up to ~17.5 million tons of
year-over-year production cuts thus far with additional tons to be added during the remainder of earnings season and likely the rest
of the year by just the public producers. Add to that further cuts by the private producers, given the current implied margins, and
we estimate full year production declines of just over 50 million tons. When adding in slightly lower imports, slightly higher exports
and a reduction in waste coal and losses/unaccounted for coal, our model suggests only a modest build in inventories by year end of
around 10-15 million tons. Inventories are likely to rise by more than that in the short run, given the lack of cold weather, which
should be corrected to some degree once summer burn season kicks in. While it certainly aint pretty for the coal industry, its not a
complete disaster either.
2012 Coal Supply/Demand Factors

Electric Demand
All Other Demand
Production
Imports
Exports
Waste Coal/Losses
Net YOY Inv. Change
(80)
Source: RJ&A Estimates
(70)
(60)
(50)
(40)
(30)
(20)
(10)
10
YOY Change (MM Tons)
Raymond James
U.S. Research
U.S. Rig Count Breakdown

2/24/2012
Total Count
U.S. Rig Count
By Basin*
Permian
Eagle Ford
Bakken
Marcellus
Haynesville
Granite Wash
Cana Woodford
Barnett
Mississippi Lime
DJ Basin
Uinta
San Joaquin Basin
Pinedale
Fayetteville
Piceance Basin
Powder River Basin
Arkoma Woodford
Utica
Other
Drill For
Oil
Dry Gas
Wet Gas
Thermal
Trajectory
Horizontal Oil
Horizontal Gas
Horizontal
% Horizontal
1981
471
246
204
131
84
76
61
55
50
41
31
30
24
23
23
17
15
13
386
2/17/2012
1994
471
241
202
134
86
77
63
56
55
41
32
30
29
23
22
17
16
15
384
W/W
YTD
YTD %
Y/Y
Y/Y %
(13)
(26)
-1%
282
17%
0
5
2
(3)
(2)
(1)
(2)
(1)
(5)
0
(1)
0
(5)
0
1
0
(1)
(2)
2
16
10
12
-7
-30
5
3
-4
2
-1
1
-2
-5
-3
-4
-4
-5
-3
-7
4%
4%
6%
-5%
-26%
7%
5%
-7%
4%
-2%
3%
-6%
-17%
-12%
-15%
-19%
-25%
-19%
-2%
120
99
47
8
-77
1
8
-22
23
13
7
7
-6
-2
-6
7
-4
7
52
34%
67%
30%
7%
-48%
1%
15%
-29%
85%
46%
29%
30%
-20%
-8%
-21%
70%
-21%
117%
16%
1265
264
446
6
1272
266
450
6
(7)
(2)
(4)
0
72
(37)
(62)
1
6%
-12%
-12%
20%
482
(73)
(123)
(4)
62%
-22%
-22%
-40%
692
473
1165
59%
682
481
1163
58%
10
(8)
2
0%
64
(66)
(2)
1%
10%
-12%
0%
332
(145)
184
1%
92%
-23%
19%
Source: Baker Hughes, Inc, Raymond James Estimates

*Includes all trajectories
Raymond James
U.S. Research
Raymond James Weekly Oilfield Review

For Week Ending:
2/24/2012
12 Month Oil Calendar Strip
12 Month Gas Calendar Strip
Brent
Henry Hub
$130.00
$6.50
$120.00
$110.00
$5.50
$100.00
$90.00
$4.50
$80.00
$70.00
$3.50
$60.00
$50.00
$40.00
$2.50
2010
Price
Percent Change
2011
2012
2010
This
Week
Last
Week
Beginning
of Year
Last
Year
$120.96
$116.04
4.2%
$93.70
29.1%
$111.28
8.7%
Source: Bloomberg
Price
Percent Change
2011
2012
This
Week
Last Beginning
Week of Year
$3.09
$3.20
-3.3%
$4.63
-33.3%
Last
Year
$4.41
-29.9%
Source: Bloomberg
24-Feb-12
This
Week
17-Feb-12
Last
Week
25-Feb-11
Last
Year
Change From:
Last
Last
Week
Year
1,265
1,272
783
-0.6%
61.6%
710
6
716
6
906
10
-0.8%
-21.6%
1. U.S.Rig Activity
U.S. Oil
U.S. Gas
U.S. Miscellaneous
U.S. Total
1,981
1,994
1,699
-0.7%
16.6%
U.S. Horizontal
1,165
1,163
981
0.2%
18.8%
U.S. Directional
210
214
220
-1.9%
-4.5%
43
41
25
4.9%
72.0%
116
113
126
2.7%
-7.9%
72
69
66
4.3%
9.1%
62.1%
61.1%
52.4%
1.6%
18.5%
1,374
1,526
1,284
-10.0%
7.0%
701
705
623
-0.6%
12.5%
259.9
1,365.7
12,983.0
638.4
254.1
1,361.2
12,949.9
630.4
288.0
1,319.9
12,130.5
673.5
2.3%
0.3%
0.3%
1.3%
-9.7%
3.5%
7.0%
-5.2%
411.7
408.3
380.4
0.8%
8.2%
2,595
521
874,516
2,761
540
869,084
1,830
273
903,275
-6.0%
-3.5%
0.6%
41.8%
90.9%
-3.2%
6.1%
4.6%
-3.0%
1.1%
0.5%
3.8%
13.9%
11.6%
-32.0%
653.4%
-42.6%
7.9%
U.S. Offshore
U.S. Offshore Gulf of Mexico
Fleet Size
# Contracted
Utilization
U.S. Weekly Rig Permits *
2. Canadian Activity
Rig Count
3. Stock Prices
(2/24/12)
OSX
S&P 500
DJIA
S&P 1500 E&P Index
Alerian MLP Index
4. Inventories
U.S. Gas Storage (Bcf)
Canadian Gas Storage (Bcf)
Total Petroleum Inventories ('000 bbls)
5. Spot Prices (US$)

Oil (W.T.I. Cushing)
$109.49
$103.24
$96.14
Oil (Brent)
$125.13
$119.58
$112.14
Gas (Henry Hub)
$2.59
$2.67
$3.81
Residual Fuel Oil (New York)
$116.13
$114.88
$15.41
Gas (AECO)
$2.13
$2.12
$3.71
UK Gas (ICE)
$9.78
$9.43
$9.07
Sources: Bak er Hughes, ODS-Petrodata, API, EIA, Oil Week , Bloomberg
* Note: Week ly rig permits reflect a 1 week lag
Raymond James
U.S. Research
Raymond James Weekly Coal Review

For Week Ending:
2/24/2012
12 Month Big Sandy Barge Prices
12 Month Powder River Basin 8800 Prices
$90 .00
$17 .00
$15 .00
$75 .00
$13 .00
$60 .00
$11 .00
$9.00
$45 .00
$7.00
$30 .00
$5.00
2010
Price
Percent Change
2011
2010
2012
This
Week
Last
Week
Beginning
of Year
Last
Year
$60.75
$60.00
1.3%
$74.10
-18.0%
$70.25
-13.5%
Source: Bloomberg
1. Coal Prices
Eastern U.S.
CSX 1%
Western U.S.
Powder River 8800
2. Production
Eastern U.S.
Western U.S.
Total
Price
Percent Change
2011
2012
This
Week
Last Beginning
Week of Year
$8.95
$8.80
1.7%
$13.00
-31.2%
Last
Year
$14.00
-36.1%
Source: Bloomberg
24-Feb-12
This
Week
17-Feb-12
Last
Week
25-Feb-11
Last
Year
Change From:
Last
Last
Week
Year
$60.75
$60.00
$70.25
1.3%
-13.5%
$8.95
$8.80
$14.00
1.7%
-36.1%
17-Feb-12
8,481
11,232
19,713
10-Feb-12
8,474
11,588
20,062
18-Feb-11
9,096
12,528
21,624
0.1%
-3.1%
-1.7%
-6.8%
-10.3%
-8.8%
Source: Bloomberg
Company Citations
Company Name
Alliance Holdings GP L.P.
Alpha Natural Resources
Arch Coal Inc.
Cloud Peak Energy
CONSOL Energy Inc.
James River Coal Company
Oxford Resource Partners L.P.
Peabody Energy Corp.
Rhino Resource Partners L.P.
Walter Energy Inc.
Ticker
AHGP
ANR
ACI
CLD
CNX
JRCC
OXF
BTU
RNO
WLT
Exchange
NASDAQ
NYSE
NYSE
NYSE
NYSE
NASDAQ
NYSE
NYSE
NYSE
NYSE
Currency Closing Price RJ Rating

$
49.34
2
$
20.46
1
$
14.29
3
$
18.25
2
$
36.33
1
$
6.30
2
$
14.00
2
$
36.33
2
$
19.75
2
$
66.31
2
RJ Entity
RJ & Associates
RJ & Associates
RJ & Associates
RJ & Associates
RJ & Associates
RJ & Associates
RJ & Associates
RJ & Associates
RJ & Associates
RJ & Associates
Notes: Prices are as of the most recent close on the indicated exchange and may not be in US$. See Disclosure section for rating
definitions. Stocks that do not trade on a U.S. national exchange may not be approved for sale in all U.S. states. NC=not covered.
Raymond James
U.S. Research
Important Investor Disclosures

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Ratings and Definitions

Raymond James & Associates (U.S.) definitions
Strong Buy (SB1) Expected to appreciate, produce a total return of at least 15%, and outperform the S&P 500 over the next six to 12 months.
For higher yielding and more conservative equities, such as REITs and certain MLPs, a total return of at least 15% is expected to be realized
over the next 12 months.
Outperform (MO2) Expected to appreciate and outperform the S&P 500 over the next 12-18 months. For higher yielding and more
conservative equities, such as REITs and certain MLPs, an Outperform rating is used for securities where we are comfortable with the relative
safety of the dividend and expect a total return modestly exceeding the dividend yield over the next 12-18 months.
Market Perform (MP3) Expected to perform generally in line with the S&P 500 over the next 12 months.
Underperform (MU4) Expected to underperform the S&P 500 or its sector over the next six to 12 months and should be sold.
Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage
impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be
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not be relied upon.
2012 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC.
Raymond James
U.S. Research
Raymond James Ltd. (Canada) definitions

Strong Buy (SB1) The stock is expected to appreciate and produce a total return of at least 15% and outperform the S&P/TSX Composite Index
over the next six months.
Outperform (MO2) The stock is expected to appreciate and outperform the S&P/TSX Composite Index over the next twelve months.
Market Perform (MP3) The stock is expected to perform generally in line with the S&P/TSX Composite Index over the next twelve months and
is potentially a source of funds for more highly rated securities.
Underperform (MU4) The stock is expected to underperform the S&P/TSX Composite Index or its sector over the next six to twelve months
and should be sold.
Raymond James Latin American rating definitions
Strong Buy (SB1) Expected to appreciate and produce a total return of at least 25.0% over the next twelve months.
Outperform (MO2) Expected to appreciate and produce a total return of between 15.0% and 25.0% over the next twelve months.
Market Perform (MP3) Expected to perform in line with the underlying country index.
Underperform (MU4) Expected to underperform the underlying country index.
Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage
impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be
providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should
not be relied upon.
Raymond James European Equities rating definitions
Strong Buy (1) Expected to appreciate, produce a total return of at least 15%, and outperform the Stoxx 600 over the next 6 to 12 months.
Outperform (2) Expected to appreciate and outperform the Stoxx 600 over the next 12 months.
Market Perform (3) Expected to perform generally in line with the Stoxx 600 over the next 12 months.
Underperform (4) Expected to underperform the Stoxx 600 or its sector over the next 6 to 12 months.
In transacting in any security, investors should be aware that other securities in the Raymond James research coverage universe might carry a
higher or lower rating. Investors should feel free to contact their Financial Advisor to discuss the merits of other available investments.
Rating Distributions
Coverage Universe Rating Distribution
Investment Banking Distribution
RJA
RJL
RJ LatAm
RJA
RJL
RJ LatAm
Strong Buy and Outperform (Buy)
56%
71%
39%
14%
42%
14%
Market Perform (Hold)
38%
28%
54%
5%
30%
3%
Underperform (Sell)
6%
1%
7%
4%
0%
0%
Suitability Categories (SR)

For stocks rated by Raymond James & Associates only, the following Suitability Categories provide an assessment of potential risk factors for
investors. Suitability ratings are not assigned to stocks rated Underperform (Sell). Projected 12-month price targets are assigned only to
stocks rated Strong Buy or Outperform.
Total Return (TR) Lower risk equities possessing dividend yields above that of the S&P 500 and greater stability of principal.
Growth (G) Low to average risk equities with sound financials, more consistent earnings growth, possibly a small dividend, and the potential
for long-term price appreciation.
Aggressive Growth (AG) Medium or higher risk equities of companies in fast growing and competitive industries, with less predictable earnings
and acceptable, but possibly more leveraged balance sheets.
High Risk (HR) Companies with less predictable earnings (or losses), rapidly changing market dynamics, financial and competitive issues,
higher price volatility (beta), and risk of principal.
Venture Risk (VR) Companies with a short or unprofitable operating history, limited or less predictable revenues, very high risk associated
with success, and a substantial risk of principal.
10
Raymond James
U.S. Research
Raymond James Relationship Disclosures

Raymond James expects to receive or intends to seek compensation for investment banking services from the subject companies in the
next three months.
Company Name
Disclosure
Alliance Holdings GP
L.P.
Limited Partnerships may generate Unrelated Business Taxable Income (UBTI), which can
create a tax liability that must be paid from a retirement account. You should receive a
Schedule K-1 from the partnership annually that would include UBTI and other financial
information. Please consult with your tax advisor to determine whether you must file and pay
tax from your account.
Raymond James & Associates co-managed a follow-on offering of AHGP shares in March 2011.
Raymond James & Associates makes a NASDAQ market in shares of AHGP.
Alpha Natural
Resources
Raymond James & Associates received non-securities-related compensation from ANR within
the past 12 months.
Arch Coal Inc.
Raymond James & Associates received non-investment banking securities-related

compensation from ACI within the past 12 months.
Cloud Peak Energy
Raymond James & Associates received non-securities-related compensation from CLD within
the past 12 months.
CONSOL Energy Inc.
Raymond James & Associates received non-securities-related compensation from CNX within
the past 12 months.
James River Coal

Company
Raymond James & Associates co-managed a follow-on offering of JRCC shares in March 2011.
Raymond James & Associates co-managed an offering of convertible debt for James River Coal
Company in March 2011 and a public offering of debt for the company in March 2011.
Raymond James & Associates makes a NASDAQ market in shares of JRCC.
Oxford Resource
Partners L.P.
Raymond James & Associates received non-securities-related compensation from OXF within
the past 12 months.
Rhino Resource
Partners L.P.
Raymond James & Associates lead-managed an initial public offering of RNO shares in
September 2010 and a follow-on offering of RNO shares in July 2011.
Raymond James & Associates received non-securities-related compensation from RNO within
the past 12 months.
Walter Energy Inc.
Raymond James & Associates received non-investment banking securities-related

compensation from WLT within the past 12 months.
Raymond James & Associates received non-securities-related compensation from WLT within
the past 12 months.
Stock Charts, Target Prices, and Valuation Methodologies

Valuation Methodology: The Raymond James methodology for assigning ratings and target prices includes a number of qualitative and
quantitative factors including an assessment of industry size, structure, business trends and overall attractiveness; management effectiveness;
competition; visibility; financial condition, and expected total return, among other factors. These factors are subject to change depending on
overall economic conditions or industry- or company-specific occurrences. Only stocks rated Strong Buy (SB1) or Outperform (MO2) have
target prices and thus valuation methodologies.
11
Raymond James
U.S. Research
Risk Factors
General Risk Factors: Following are some general risk factors that pertain to the projected target prices included on Raymond James research:
(1) Industry fundamentals with respect to customer demand or product / service pricing could change and adversely impact expected
revenues and earnings; (2) Issues relating to major competitors or market shares or new product expectations could change investor attitudes
toward the sector or this stock; (3) Unforeseen developments with respect to the management, financial condition or accounting policies or
practices could alter the prospective valuation; or (4) External factors that affect the U.S. economy, interest rates, the U.S. dollar or major
segments of the economy could alter investor confidence and investment prospects. International investments involve additional risks such as
currency fluctuations, differing financial accounting standards, and possible political and economic instability.
Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability
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February 27, 2012

Energy: Stat of the Week _______________________________________________________________________________________

LT Avg & 2011A of

Source: EIA, RJ&A Estimates

Comparative Generation Dispatch Costs

Dispatch Cost ($/Mwh)

Source: Raymond James Estimates

Contracts, other factors providing some relief to gas pains

2012 U.S. Coal Contract Positions

Source: Company Reports, RJ Estimates

2011 Avg = 1.5 Bcf/d

YOY C/G Switching (Bcf/d)

Source: Energy Information Administration, RJ&A Research

Source: Edison Electric Institute

CAPP Coal Prices vs. Cash Costs

CAPP Cash Costs/Ton

CAPP Prices ($/ton)

PRB Coal Prices vs. Cash Costs

Source: Company Filings, Thomson Reuters, RJ Estimates

Source: Company Filings, Thomson Reuters, RJ Estimates

U.S. Coal Export Growth/Declines

YOY Production Change (MMtons)

U.S. Coal Production Growth/Declines

2012 Coal Supply/Demand Factors

Source: RJ&A Estimates

YOY Change (MM Tons)

U.S. Rig Count Breakdown

Source: Baker Hughes, Inc, Raymond James Estimates

Raymond James Weekly Oilfield Review

12 Month Oil Calendar Strip

12 Month Gas Calendar Strip

5. Spot Prices (US$)

Raymond James Weekly Coal Review

12 Month Big Sandy Barge Prices

12 Month Powder River Basin 8800 Prices

Currency Closing Price RJ Rating

Important Investor Disclosures

Ratings and Definitions

Raymond James Ltd. (Canada) definitions

Investment Banking Distribution

Strong Buy and Outperform (Buy)

Market Perform (Hold)

Suitability Categories (SR)

Raymond James Relationship Disclosures

Arch Coal Inc.

Raymond James & Associates received non-investment banking securities-related

Cloud Peak Energy

CONSOL Energy Inc.

James River Coal

Walter Energy Inc.

Raymond James & Associates received non-investment banking securities-related

Stock Charts, Target Prices, and Valuation Methodologies

This is RJA client

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