Peabody Energy (NYSE:BTU) executives highlighted record safety performance, the early completion of development work at the Centurion metallurgical coal mine, and improving coal market fundamentals during the company’s fourth-quarter and full-year 2025 earnings call.
Record safety and environmental metrics
President and CEO Jim Grech opened the call by emphasizing operational execution, led by what he described as another record year for safety. Peabody reported an incident rate of 0.71 per 200,000 hours worked, which Grech said was 12% better than the prior all-time record set a year earlier.
Centurion start-up and strategy to expand metallurgical exposure
Grech said he visited Australia and saw the Centurion Mine in its final stages of preparation, with the “very last shield” being installed ahead of starting longwall mining. He said this was “well ahead” of the project’s original schedule and called Centurion the cornerstone asset in Peabody’s plan to intentionally shift its portfolio toward higher-margin metallurgical coal.
Management outlined several expected benefits of Centurion:
- Volume growth: Centurion is expected to ship an average of 4.7 million tons per year of premium hard coking coal, with 3.5 million tons expected in 2026 and a ramp to 4.7 million by 2028.
- Pricing impact: The company expects metallurgical coal realizations across its portfolio to rise from 70% of the recognized benchmark in 2025 to 80% in 2026, with further improvement possible as Centurion volumes scale.
- Long life: Including the Wards Well acquisition in 2024, Grech said Centurion is expected to have a 25+ year mine life with an integrated mine plan of 140 million tons.
- Project economics: Grech reiterated prior disclosures of a $1.6 billion net present value for the project and said an updated assessment for Centurion alone represented $2.1 billion NPV at $225 benchmark pricing.
In the Q&A, management said the initial approximately $500 million spent on the southern longwall area is complete. Looking ahead, Grech said development for the northern area is expected to run about $100 million per year for the next three years, plus approximately $25 million per year of sustaining capital in the south.
Development initiatives: rare earth testing, renewable siting, and waste-gas power
Grech said the company’s development division is pursuing opportunities to “maximize long-term earnings and cash flow potential” from Peabody’s land and mineral holdings. Initiatives discussed included renewable projects on formerly mined lands in the U.S. through R3 Renewables, as well as projects at Centurion to convert waste gas to power beginning at 5 MW and expanding to 20 MW. He also mentioned work on a small facility to capture coal seam gas and convert it into LNG.
On rare earth and critical minerals, Grech said Peabody has conducted a testing program since mid-2025, including more than 800 samples from the Powder River Basin (PRB). He said results have shown “promising concentrations” including heavy rare earths, which he said represented an estimated 21% to 28% of critical mineral oxide concentrations identified to date. He also cited targeted concentrations of germanium and gallium in select locations.
Grech said Peabody is developing flow sheets with multiple third parties and continuing engagement with state and federal agencies. He noted the company was recommended to receive a $6.25 million grant from the Wyoming Energy Authority for a pilot processing plant, pending a public comment period and consideration by the governor later in the month. Management described its approach as “options-based,” using multiple feedstocks, locations, and process partners.
Coal market commentary: met pricing up, thermal stable, U.S. coal generation stronger
Chief Commercial Officer Malcolm Roberts said seaborne metallurgical benchmark pricing had risen to its highest level in 18 months, increasing 15% from around $190 per ton at the beginning of the fourth quarter, with an additional 15% increase since the start of the year. He attributed tightening conditions in part to policy and supply-demand dynamics in China, alongside a trend he expects to continue in 2026 where global steel production gradually shifts from China to India.
On seaborne thermal coal, Roberts said the Newcastle benchmark was about $115 per ton, calling it a stable trading range. He also pointed to Indonesia policy adjustments that could reduce seaborne supply by more than 100 million tons in 2026 if enforced, which he said could be supportive for Newcastle pricing.
For U.S. coal, Roberts said coal fuel generation was up an estimated 13% year-over-year in 2025 while coal production rose an estimated 4%, leading to an estimated 15% decline in utility stockpiles. He argued existing coal plants represent the best form of incremental generation for the next several years due to constraints facing other generation sources.
Roberts also said Peabody recently reached agreement with a major Midwestern utility for more than 20 million tons of Illinois coal over five years, describing total sales under the contract as exceeding $1 billion.
Financial results, liquidity, and 2026 guidance
Chief Financial Officer Mark Spurbeck reported fourth-quarter net income attributable to common stockholders of $10.4 million, or $0.09 per diluted share. Adjusted EBITDA was $118 million, up 19% from the prior quarter. The company generated $69 million of operating cash flow from continuing operations in the quarter and $336 million for the full year.
Peabody ended 2025 with $575 million in cash and total liquidity above $900 million, which Spurbeck said reflected disciplined capital deployment during Centurion development and consistent cash generation.
Segment highlights provided on the call included:
- Seaborne Thermal: Q4 shipments of 3.3 million tons, realized export pricing of $81.80 per ton, and Q4 adjusted EBITDA of $63.5 million. Full-year adjusted EBITDA was $222 million.
- Seaborne Metallurgical: Q4 shipments of 2.5 million tons with costs at $113 per ton and Q4 adjusted EBITDA of $24.6 million. Full-year adjusted EBITDA was $56 million, with full-year shipments of 8.6 million tons.
- U.S. Thermal: Q4 adjusted EBITDA of $63 million and full-year adjusted EBITDA of nearly $250 million. PRB shipped 22.3 million tons in Q4 and 84.5 million tons for the year, while “other U.S. thermal” shipped 3.7 million tons in Q4.
For 2026, management guided to:
- Seaborne thermal shipments: 12.5 million tons, including 8 million export tons, with costs of $50 per ton. Spurbeck said volumes will be lower than 2025 due to the closure of the Wambo underground mine and lower production at Wilpinjong tied to mine progression.
- Seaborne met shipments: 10.8 million tons, with costs targeted at $113 per ton and average realizations expected to rise to 80% of the Premium Hard Coking Coal index.
- PRB shipments: 82–88 million tons; management said 78 million tons were priced at $13.40, with costs expected around $11.50 per ton.
- Other U.S. thermal: 13.7 million tons; management said 13.2 million tons were priced at $54.40, with costs expected at $47 per ton.
- Total capital expenditures: $340 million, about $70 million lower than 2025 as Centurion begins longwall production.
In the Q&A, management said its 2026 Australian cost guidance assumes an AUD/USD exchange rate of $0.70 and uses a $225 benchmark for metallurgical coal. Spurbeck also said first-quarter 2026 seaborne thermal shipments are expected to be “much less than ratable” due to mine sequencing, with improvements expected in Q2 and Q3. For seaborne met, he cited longwall moves at both Metropolitan and Shoal Creek and a ramp at Centurion, with Centurion expected to produce about 700,000 tons in Q1, 1.0–1.1 million tons in Q2 and Q3, then lower output in Q4 due to a longwall move.
On capital returns, Spurbeck reiterated that shareholder returns remain the top priority and said that with Centurion’s development spending declining and with higher benchmark pricing, “substantial free cash flow generation” would be visible at current prices. He added that with Centurion development risk “off the table,” the return of free cash flow to shareholders “should be much closer to 100% versus 65%.”
About Peabody Energy (NYSE:BTU)
Peabody Energy Corporation is one of the world’s largest private-sector coal companies, engaged primarily in the production and sale of metallurgical and thermal coal. The company’s operations span surface and underground mines, serving utilities, steel mills and other industrial customers that rely on coal as an essential component in power generation and steelmaking. Peabody’s product portfolio includes high-energy thermal coal for electricity generation and low-volatile metallurgical coal used in steel production, reflecting its diverse end-market reach.
Founded in 1883, Peabody Energy has grown from a regional mining concern into a global energy supplier.
