Cloud Peak Energy Inc. (NYSE:CLD): Light at the End of the Tunnel?


Shares in Cloud Peak Energy Inc. (NYSE:CLD), the venerable US coal producer, got a lift from a rating upgrade by S&P Global.

The stock jumped 6.78% to close Tuesday at $6.14 after 2.87 million shares changed hands.

Cloud Peak shares touched a low of $1.08 in January 2016, but have since rebounded higher by 468.52% from that low.

Cloud Peak Energy Inc. (NYSE:CLD): Benefiting from natural gas price?

Some of that bullishness can be described to the rising prices of natural gas.

According to the EIA: “The recent decline in the generation share of coal, and the concurrent rise in the share of natural gas, was mainly a market-driven response to lower natural gas prices that have made natural gas generation more economically attractive. Between 2000 and 2008, coal was significantly less expensive than natural gas, and coal supplied about 50% of total U.S. generation. However, beginning in 2009, the gap between coal and natural gas prices narrowed, as large amounts of natural gas produced from shale formations changed the balance between supply and demand in U.S. natural gas markets.”

Natural gas prices have nearly doubled since March this year, and it is no surprise that almost of all of the gains in Cloud Peak have come in the same period.

Cloud Peak Energy Inc. (NYSE:CLD): S&P Upgrade

Analysts at S&P Global raised Cloud Peak’s credit rating from SD to B-, and simultaneously boosted the rating on Cloud Peak’s 2019 senior unsecured notes from D to CCC.

It may be noted, however, that S&P Global continue to maintain a negative outlook on the company citing its “weak operating performance and the uncertainty of the company’s ability to generate positive operating cash flow in the next 12 months.”

However, Cloud Peak has managed to make some breathing room for itself after it made amendments to its financing structure. These included negotiating a modified revolving credit agreement and new terms with its bondholders that exchanged a higher coupon rate with an extension of maturity.

Technically, Cloud Peak shares on the weekly chart have shown a bullish rounding bottom pattern.


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