Oct. 27, 2009 (PR Newswire) -- RICHMOND, Va., Oct. 27 /PRNewswire-FirstCall/ -- Massey Energy Company (NYSE: MEE) today reported net income of $16.5 million or $0.19 per share and EBITDA of $112.1 million for the quarter ended September 30, 2009. Massey also reported continuing strong cash generation as cash and restricted cash increased by $102.4 million. Produced coal revenue for the quarter was $535.5 million. These results compared to net income of $51.6 million or $0.61 per share, EBITDA of $158.7 million and produced coal revenue of $666.4 million in the third quarter of 2008.

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Commenting on the Company's third quarter results, Massey's Chairman and Chief Executive Officer Don Blankenship said, "We are pleased to have increased our cash balance by over $100 million during the quarter, even though it was partially offset by the deposit of a $72 million appeal bond related to the Harman litigation. We achieved the strong cash generation amid difficult conditions in the global coal markets and in spite of operating challenges resulting from a fire that destroyed a key preparation plant in August."

"We also continued to add to our dominant Central Appalachia reserve base and related competitive advantages during the quarter," Blankenship added. "We already have approximately 12 million tons of annual met coal production capacity in place and our recent acquisition of the Alloy assets from Appalachian Fuels gives us yet another opportunity to expand met coal production in the near term. In addition, our reserve exchange with Foundation Coal for the Laurel Creek property will provide longer term benefits such as expanded mining infrastructure and increased consolidation of the region's coal reserves."

The Bandmill preparation plant was destroyed by fire on August 27, 2009. This incident impacted the operations at the Logan County resource group and, to a lesser extent, the Company as a whole during the quarter. Total shipments lost during September as a result of the Bandmill fire are estimated at 0.3 million tons of coal.

The Laurel Creek reserve and asset exchange, which occurred in July 2009, resulted in a $24.9 million non-cash gain which was recognized in the third quarter and was included in other income.

Massey's third quarter operating cash margin per ton was $11.98. Though a strong result, this was down from the near-record high operating cash margin per ton of $16.10 reported in the third quarter of 2008. The decline was driven by a 4 percent decrease in average realized prices on coal shipped and an increase in cash cost per ton of approximately 3 percent as compared to the third quarter of 2008. Average realized prices were impacted most significantly by product mix as utility coal shipments comprised 70 percent of the total tons shipped in the third quarter of 2009 compared to 65 percent in the third quarter of 2008 while higher priced metallurgical coal tons comprised 22 percent of total tons in the third quarter of 2009 compared to more than 24 percent in the third quarter of 2008. The impact of the weaker mix was only partially offset by price increases of 4 percent and 5 percent for utility coal and industrial coal, respectively. The average realized price for metallurgical coal shipped in the third quarter of 2009 declined by 13 percent as compared to the same period in 2008. Average cash cost per ton (see note 7 below for more information on a change in the calculation of average cash cost per ton) for the third quarter of 2009 was $49.81 compared to $48.49 in the third quarter of 2008. The increase was largely the result of higher fixed cost absorption on lower volume shipped.

3rd Quarter Comparative Statistics
----------------------------------
3rd Qtr.   2nd Qtr.   3rd Qtr.
2009       2009       2008
----       ----       ----
Produced tons sold (millions)             8.7        9.4       10.3
Produced coal revenue ($millions)      $535.5     $603.2     $666.4
Produced coal revenue per ton          $61.79     $64.14     $64.59
Average cash cost per ton (see note 7) $49.81     $51.53     $48.49
EBITDA ($millions)                     $112.1     $116.3     $158.7

For the first nine months of 2009, Massey generated produced coal revenue of $1.82 billion and recorded net income of $80.1 million or $0.94 per share. This compared to produced coal revenue of $1.92 billion and net income of $0.2 million in the first nine months of 2008. EBITDA was $373.8 million in the first nine months of 2009 compared to EBITDA of $241.7 million in the first nine months of 2008.

First Nine Months Comparative Statistics
----------------------------------------
2009         2008
----         ----
Produced tons sold (millions)                   28.9         30.8
Produced coal revenue ($millions)           $1,819.8     $1,920.0
Produced coal revenue per ton                 $63.02       $62.43
Average cash cost per ton (see note 7)        $50.64       $46.11
EBITDA ($millions)                            $373.8       $241.7

Reconciliations for non-GAAP measures are provided in attached notes to financial statements.

Coal Market Overview

The continuing global economic weakness has resulted in continuing weakness and uncertainty in world coal markets. Coal contracting and shipment activities remained slow and coal stockpiles increased during the third quarter of 2009 as total electric power generation declined and switching to natural gas fired generation continued.

--  Coal burn at utilities in the Southeastern United States was down 18
percent in the first eight months of 2009 compared to the same period a
year ago according to industry estimates.   It is also estimated that
the burn of Central Appalachia coal was down 22 percent in the first
eight months of the year.  These declines are due in part to lower
overall electric power demand and increased use of natural gas for power
generation purposes.
--  Receipts of coal at Southeastern utilities were estimated to be down 7
percent in the first eight months of 2009.  Coal stockpiles in terms of
tons increased by approximately 69 percent in the region since the end
of August 2008.  Receipts of Central Appalachia coal were estimated to
have declined by 7 percent during the first eight months of the year as
compared to the same period a year ago.
--  The Energy Information Administration (EIA) projects that lower electric
power sector coal consumption will continue for the remainder of 2009
with the total annual decline projected at more than 9 percent due to
lower overall electric power demand and an increase in generation fueled
by natural gas.
--  Steam coal export volumes by U.S. producers decreased 35 percent in the
first eight months of 2009 compared to the first eight months of 2008.
Metallurgical coal exports declined 24 percent in the same period.  The
EIA forecasts that steam coal exports will decline by about 38 percent
for the full year and met coal exports will decline by 22 percent as the
weak global economy drives lower demand in international markets.
--  According to the World Steel Association, global crude steel output
declined 18 percent in the first eight months of 2009 as compared to the
same period in 2008.  US steel production was down 49 percent in the
first eight months of 2009 compared to the first eight months of 2008.

--  The EIA expects the coal industry to respond to the weak market
conditions by reducing production by about 8 percent in 2009.  According
to EIA estimates, total U.S. coal production was down about 6 percent in
the first nine months of 2009.  Production in Central Appalachia was
down about 11 percent in the same period.

While market conditions remained weak in the first three quarters of the year and high stockpile and inventory levels in both thermal and metallurgical coal point to further weakness, there have been some positive indicators in the industry recently that may signal some market improvement:

--  Crude steel production in China was up 22 percent in the month of August
compared to the same month in 2008.  For the first eight months of the
year China's crude steel production was up 5 percent compared to the
same period a year ago.
--  Over 40 previously idled blast furnaces world wide representing over 60
million tons of annual production capacity have been restarted since
June or are planned to be restarted by year end.

--  Natural gas prices have rebounded by nearly 60 percent since September
1, 2009 (September 1 through October 15) which we believe will increase
the competitiveness of coal as the fuel of choice for electric power
generation.

Massey continues to believe that the quality of Central Appalachia coal allows it to enjoy significant market diversity and its relative proximity to sea ports makes it a viable source of coal to fill the growing demand for energy throughout most of the world. Massey believes that as coal demand strengthens in Asia, more Australian produced coal will be sold into that region, resulting in increased opportunities for Massey to export coal to customers throughout the Atlantic basin.

Safety

Massey remains on track for another record year in terms of safety. Through the first nine months of 2009, Massey reported a non-fatal days lost (NFDL) incident rate of 1.72. The Company's previous best rate for a full year was 1.93, achieved in 2008. By comparison, the bituminous coal industry average NFDL rate was 2.95 in 2008.

Liquidity and Capital Resources

Massey ended the third quarter of 2009 with $640.0 million in Cash and cash equivalents. This compared to $607.0 million at December 31, 2008. In addition, the Company had $15.1 million invested in the Reserve Primary Fund at the quarter's end, which is classified as a short-term investment as the availability of these funds remains subject to the liquidation of the underlying assets of the Fund. The Company had $74.4 million available under its asset-based revolving credit facility at September 30, 2009.

During the third quarter of 2009 Massey was required to post an appeal bond in the amount of $72 million in cash in relation to the Harman litigation which is being considered by the West Virginia State Supreme Court. The posted cash will be returned to the Company should the Court once again rule in Massey's favor. The Court has not provided a specific timeframe for rendering a decision on the case.

Total debt at September 30, 2009 was $1,324.3 million compared to $1,312.2 million at December 31, 2008. Massey's total debt-to-book capitalization ratio was 52.2 percent at September 30, 2009 compared to 53.8 percent at December 31, 2008. After deducting available cash and short-term investments of $655.1 million and restricted cash of $118.0 million, net debt totaled $551.2 million. Total net debt-to-book capitalization was 31.3 percent at September 30, 2009 compared to 35.5 percent at December 31, 2008. (December 31, 2008 amounts have been adjusted to conform with accounting guidance related to the Company's 3.25% convertible notes, effective January 1, 2009. See Note 8 to the attached financial statements.)

Capital expenditures for the third quarter 2009 totaled $43.8 million compared to $230.3 million in the third quarter 2008. For the full year 2009 Massey currently expects CAPEX of approximately $275 million.

Depreciation, depletion and amortization (DD&A) was $66.3 million in the third quarter 2009 compared to $65.2 million in the third quarter of 2008. Massey expects DD&A to be in the range of $275 million to $280 million for the full year 2009.

Guidance Update

The Company now expects full year 2009 produced coal shipments to be between 37.5 and 38.5 million tons, with average produced coal realization between $63.00 and $63.50 per ton. Average cash cost per ton for the full year 2009 is expected to be between $50.50 and $51.00. Other income is expected to be between $80 and $100 million.

For 2010, Massey continues to project produced coal shipments in the range of 37.0 to 41.0 million tons; however, the Company has increased expected average sales price range to $64.00 to $67.00 per ton due to its current contracted position. Massey has approximately 39 million tons committed for 2010. Of the committed tons, 33 million tons have been priced (average price of approximately $63 per ton). Of the committed tons that remain unpriced, approximately two thirds are metallurgical coal. Massey expects cash costs for 2010 to be in the range of $48.00 to $51.00 per ton. Expectations for capital expenditures in 2010 remain in the range of $100 to $200 million, excluding the cost of rebuilding the Bandmill plant, which Massey expects to be funded primarily by insurance proceeds. With results in these ranges, the Company believes it would be significantly cash positive for the year.

Continuing economic volatility and uncertainty make long-term forecasting difficult. Considering this challenge, the Company has developed initial broad ranges of guidance for 2011. Massey presently expects produced coal shipments for 2011 in the range of 37.0 to 44.0 million tons, with average produced coal realization between $64.00 and $71.50 per ton. Average cash cost in 2011 is expected in the range of $46.00 to $52.00 per ton. The Company expects capital expenditures in 2011 to be approximately $150 to $225 million.

Company issued guidance is summarized below:

(In millions except
per ton amounts)          2009              2010              2011

Produced Coal
Shipped Tons          37.5 to 38.5      37.0 to 41.0      37.0 to 44.0

Average Price/Ton    $63.00 to $63.50  $64.00 to $67.00  $64.00 to $71.50

Average Cash
Cost/Ton            $50.50 to $51.00  $48.00 to $51.00  $46.00 to $52.00

CAPEX (approx)             $275          $100 to $200      $150 to $225

Other Income            $80 to $100       $50 to $100       $20 to $100

Conference Call, Webcast and Replay

Members of the Company's senior management will hold a conference call to discuss the second quarter results and operations on Wednesday, October 28 at 11:00 a.m. EDT. The call can be accessed via the Massey Energy Company website at www.masseyenergyco.com. A replay of the call will be available at the same site through November 28, 2009.

Company Description

Massey Energy Company, headquartered in Richmond, Virginia, with operations in West Virginia, Kentucky and Virginia, is the largest coal company in Central Appalachia and is included the S&P 500 index.

FORWARD-LOOKING STATEMENTS: Certain statements in this press release constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to come within the safe harbor protection provided by those sections.