Q4 2023 Peabody Energy Corp Earnings Call

Participants

Karla Kimrey; VP, IR & Communications; Peabody Energy Corp

James Grech; President, Chief Executive Officer, Director; Peabody Energy Corp

Mark Spurbeck; Vice President - Finance; Peabody Energy Corp

Malcolm Roberts; Chief Marketing Officer; Peabody Energy Corp

Lucas Pipes; Analyst; B. Riley Securities

Katja Jancic; Analyst; BMO Capital Markets

Nathan Martin; Analyst; Benchmark Companies

Chris LaFemina; Analyst; Jefferies Group LLC

Michael Dudas; Analyst; Vertical Research Partners LLC

Presentation

Operator

Good morning and welcome to the Peabody First Quarter 2023 earnings conference call. (Operator Instructions) Please note, this event is being recorded.
I would now like to turn the conference over to Karla Kimrey, Vice President of Investor Relations. Please go ahead.

Karla Kimrey

Good morning, and thanks for joining Peabody's earnings call for the fourth quarter and full year of 2023. With me today are President and CEO, Jim Grech; CFO, Mark Spurbeck; and our Chief Marketing Officer, Malcolm Roberts.
Within the earnings release, you will find our statement on forward-looking information as well as a reconciliation of non-GAAP financial measures. We encourage you to consider the risk factors referenced there along with our public filings with the SEC.
I'll now turn the call over to Jim.

James Grech

Thanks, Karla, and good morning, everyone. For the full year 2023, our operations performed as expected, delivering another year of strong results, allowing us to further enhance shareholder value. We pre-funded our long-term mine closure and reclamation obligations and implemented a robust shareholder return plan which resulted in reducing our shares outstanding by over 11%. We also continued to strategically reinvest in our met portfolio versus internal development projects. The pending acquisition of a large portion of awards well reserved adjacent to the project and the purchase of the new longwalls. It's at a Shoal Creek and Metropolitan operations in the fourth quarter of 2023. We produced strong results despite a nine Peabody related train derailment and the mainline in Australia that interrupted some deliveries. In December, we continued to advance development of our Cinterion premium hard coking coal project and successfully put the new longwall at Shoal Creek into production ahead of schedule given the March mine fire Cherry Creek, this was an incredible achievement that would not have been possible without the efforts of our dedicated employees working in close coordination with them.
Before I expand on the markets, I want to thank our global employees for their continued focus and commitment to working safely and efficiently coming off our lowest annual global injury rate in company history. Last year, this year, we achieved our second best annual Annual Global injury rate and a record low injury rate in Australia for a calendar year, opening online celebrated two years with no lost time incidents. Our 20 mile mine when the Sentinels of Safety Award for the 2nd year in a row, recognizing the mine as the safest underground mine in the US.
Now turning to the global coal markets. Seaborne thermal coal markets were range-bound during the quarter. Elevated coal and natural gas inventories in the Northern Hemisphere have continued to weigh on demand for high energy thermal coal, coupled with an increased supply from the East Coast of Australia, resulting in Newcastle coal trading within a range of $120 to $150 a tonne. Asian thermal coal imports continue to grow with China reporting that thermal coal imports totaled 350 million, 354 million metric tonnes for 2023, increasing by 62% compared with the year-ago level and are by far the largest contributor to Asian import growth. In contrast, Japan and Korea are on track to record mild decreases in imports for 2023 within the seaborne metallurgical coal market. The volatility, which characterized the first nine months of 2023, continued during the balance of the year. The steel sector outside of China showed growth in crude steel output during the three months ended December 31st, 2023, led mainly by India and its ongoing strong economic expansion.
Total crude steel output during the period. However, contracted because of the sharp decline in Chinese production for steel producers reported thin margins and slower domestic demand premium hard coking coal indices finished the quarter marginally lower around $323 a tonne. The outlook for the metallurgical coal market remains positive, with seaborne supply remaining below historical levels, combining with strong Indian purchase interest and new import demand for steel making coals within Southeast Asia. In comparison, PCI and semi-soft coking coals observe more substantial price reduction. United States electricity generation from thermal coal has declined year-on-year due to low gas prices and the impacts of renewable generation. The near term demand outlook is anticipated to be challenged by comparatively high generator inventories as we transition into the post winter shoulder season renewables continue to grow as part of the energy mix.
However, we have seen several of our customers delay the retirement of some of their plants in order to ensure grid reliability Now moving on to our operating segments. Our seaborne thermal fourth quarter coal volumes came in at 3.7 million tonnes, which was lower than anticipated, primarily due to a train derailment on the main line, which serves our Wilpinjong Mine. The derailment occurred on December sixth and impacted shipments for 10 days. Segment costs per tonne. We're at the high end of our range due to the lower shipments. Our seaborne met segment shipments were 2.1 million tonnes in the quarter in line with expectations, while total segment costs were better than anticipated $108 per tonne in December were able to successfully commenced new longwall production at Shoal Creek in a newly developed L. panel district ahead of schedule in the PRB shipments of 23.6 million tonnes were better than anticipated this quarter. Peabody increased our production share of the total PRB shipments from 39% in the third quarter, 43% in the fourth quarter.
Now the U.S. thermal shipments were 3.7 million tonnes, slightly below expectations as we had a few customers reduced their demand due to high inventories and natural gas pricing inside of our active operations. We continue to make progress at this internally and mine our key metallurgical coal growth project in December, we renamed North Goonyella. As centering in mind, signifying a new chapter in our operations center in complex will include the former North Goonyella Mine, along with the new awards while deposit, which is adjacent to our existing property. We anticipate closing on the worthwhile transaction in the second quarter at site. We continue to advance on initiatives to support the commencement of development call in April, including installation of a new conveyor system and the commissioning of equipment for underground development.
We're also making progress with building out the workforce as we welcome our first group of permanent underground workers. We'll continue to onboard additional underground operators and maintenance staff to support scaling up of development. We continue to expect that first sales of development coal in the second half of 2024 and longwall coal in 2026. We entered a new year with a diverse platform that gives us the stability and consistency to deliver results allowing us to return cash to shareholders and advance major projects as we re-weight our portfolio to more seaborne coal.
As we look forward to 2024, we are focused on executing our strategy by continuing to deliver consistent, predictable and reliable performance from our operations, advancing Cinterion, our Tier one premium hard coking coal development project in delivering value to our shareholders through our previously announced shareholder return program.
I'll now turn it over to Mark to cover the financial details.

Mark Spurbeck

Thanks, Jim. In the fourth quarter, we recorded net income attributed to common stockholders of $192 million or $1.33 per diluted share and adjusted EBITDA of $345 million. For the full year, we recorded net income of $760 million or $5 per diluted share and adjusted EBITDA of $1.4 billion. The Company generated $1.1 billion of operating cash flow from continuing operations and $724 million of available free cash flow. Based on these results, we have announced the return of $471 million to shareholders, primarily through share buybacks. Through December 31st, we have repurchased 16.1 million shares, better than 11% of shares outstanding and have 80 million more to deploy in the first quarter.
Turning now to segment results. In the fourth quarter, seaborne thermal reported $100 million of adjusted EBITDA tonnes shipped were less than anticipated primarily due to a rail issue on the mainline, which limited Wilpinjong shipments and moved costs toward the higher end of guidance for the full year, the seaborne thermal segment reported $577 million of adjusted EBITDA.
Export shipments increased to 10 million tonnes in the segment achieved adjusted EBITDA margins of 43%. Seaborne metallurgical segment generated $166 million of adjusted EBITDA in the fourth quarter, more than double the prior quarter's result, as both shipments and realized prices were substantially higher costs of $108 per tonne were below the low end of guidance at Shoal Creek achieved a great earlier than expected start of the new longwall in the LA panel district.
For the full year, the seaborne metallurgical segment reported $438 million of adjusted EBITDA. Shipments increased to 6.9 million tonnes despite a tough transition year at Shoal Creek. The segment achieved adjusted EBITDA margins of 34%. A favorable result considering our average realized price was $55 per tonne lower than last year. As a result of weaker PCI coal prices mines shipped 23.6 million tonnes, our highest quarterly volumes since 2019. A testament to our team's full recovery from the midyear tornado disruption putting themselves in a position to seize an opportunity to load additional trains.
Higher shipments were partially offset by additional repairs and other costs, resulting in $38 million of adjusted EBITDA for the quarter. For the full year, adjusted EBITDA was $154 million, more than double last year as we continue to benefit from the sales book we built during 2021 and 2022, where we favored longer term contracts with improved pricing over shorter term contracts at spot pricing levels year over year, our PRB average realized price increased $0.85 per tonne or nearly 7%. And over the last two years, our PRB average realized price is up 25%.
The other U.S. thermal mines delivered $42 million of adjusted EBITDA in the fourth quarter. Production was impacted by the planned longwall move at Twentymile and lower volumes from certain customers reduced shipments below guidance. However, we benefited from a substantial increase in the average realized price to $57 per tonne. You do buyouts and compensation payments from these customers as a result segment EBITDA exceeded implied guidance for the full year. Adjusted EBITDA was $208 million, and we achieved segment adjusted EBITDA margins of 23%. Together the U.S. thermal mines produced $361 million of adjusted EBITDA in 2023, an increase of $51 million over the previous year.
Looking ahead to 2024, we expect another year of consistent operating and financial results. Seaborne thermal volumes are expected to be very similar to 2023. However, we anticipate benefiting from a higher proportion of Newcastle spec product due to mine sequencing at the Wambo Open-Cut mine shipments are anticipated to be 15 million to 16 million tonnes, including 10 million export tonnes, and costs are projected to be consistent with 2023 levels at $45 to $50 per tonne.
Seaborne Metallurgical volumes are projected to increase by 1 million tonnes to 8 million, primarily due to a full year of production from the newly installed longwall at Shoal Creek segment costs are expected to improve to $110 to $120 per tonne in the PRB, we are forecasting shipments of 80 million to 87 million tonnes, and we have 85 million tonnes priced at $13.70. Costs are expected to remain mostly flat with 2023 levels at $11.75 to $12.50 per tonne.
Other U.S. thermal volume is expected to be 15 million tonnes, down slightly from 2023 as we transition from the El Segundo to try and reserves out West, we have 15.2 million tonnes priced at 53 70 and expect costs in the range of $41 to $45 per tonne, largely consistent with last year. Total capital expenditures are estimated at $375 million, including $235 million of project capital, primarily for the continued development of Centurion and sustaining capital of $140 million. Additionally, we expect to close the previously announced acquisition of awards.
Welcome deposit. Specifically for the first quarter, seaborne thermal volumes are expected to be 3.9 million tonnes, including 2.5 million export tonnes as we ramp up from the Wambo underground longwall move from the fourth quarter of last year. Cost per tonne are expected to be consistent with prior quarter at $48 to $53 per tonne seaborne metallurgical volumes are expected to be lower than ratable at 1.4 million tonnes, with cost temporarily elevated at 130 to 140 per tonne, primarily due to a longwall move at Metropolitan and mine sequencing at the CMZ. We also continue to manage the Demopolis lock situation a lot under repair that has the potential to temporarily increased transportation costs of Salt Creek, but we don't anticipate a finance to impact the first quarter results. We expect to ship 21 million tonnes of PRB coal in the quarter with costs largely consistent with the prior quarter and 1175 to 1250 per tonne. Other US thermal coal shipments are expected to be in line with the prior quarter at 3.6 million tonnes, while costs improve $41 to $45 per tonne.
In summary, Peabody delivered another year of consistently strong results and generated substantial EBITDA and most importantly, free cash flow. Peabody's diversified portfolio of mines is uniquely positioned, having generated approximately 40% of adjusted EBITDA from the seaborne metallurgical segment, 40% from the seaborne thermal segment and 20% from the U.S. thermal segments over the last two years after repaying the last of our secured debt in 2022 last year, we pre-funded all future mine closure and reclamation obligations, further enhancing the Company's financial strength and flexibility with our financial and environmental liabilities addressed. We reinstated a robust shareholder return program and announced the return of $471 million to our shareholders based on 2023 results. Last month, we announced the new $320 million revolving credit facility, further enhancing the Company's financial resiliency during the development period. As insurance, we anticipate achieving our goal of further weighting Peabody's long term cash flow towards premium hard coking coal when longwall production begins in 2026, we remain focused on creating shareholder value, operating safe and efficient mines, maximizing free cash flow and shareholder returns and continuing development of Centurion all while maintaining our financial strength. Operator, I'd now like to turn the call over for questions.

Question and Answer Session

Operator

(Operator Instructions) Lucas Pipes, B. Riley Securities.

Lucas Pipes

Thank you very much, operator. Good morning, everyone. And on my right. My first question is on the met coal guidance for 2020 for some nice nice outlook there. And that two to twofold question first, would you be able to provide a breakdown of the quality of met coal at the midpoint, call it, 8 million tonnes? And then and how many development tonnes from some Turion would be included in that. Thank you very much.

Mark Spurbeck

Hi, Lucas. Good morning. Yes, we're real pleased with the 8 million tonnes for the full year 2024 are really stepping up a million tonnes and really based and good production from Shoal Creek. As you're aware, we have a little bit of development core. We expect that U.S. ensuring we'll be getting that coal and building inventories. Probably sales will be light on closer to well of 100, 150,000 tonnes. When we look at the total over the portfolio, probably looking at about 4 million tonnes of PCI and about a million and a half a High-Vol A. product I-many from shore Creek.
I think that the balance, maybe I didn't catch all. The rest of that is metropolitan data, which is kind of less semi-hard coking, both what would be the best index. But Metropark, I mean, we continue to look at the whole portfolio and achieving that off of a premium hard coking coal and 65% to 70%. But our Nalco, maybe you want to address the relativities of those products go.

James Grech

Look, we don't we don't list independently each of our shared relativities, but Metro is clearly passed against them from low-vol hard coking coal at a small discount to that.

Lucas Pipes

Very helpful. I appreciate that. Thank you. Then kind of staying on the met coal side, corporates and Turion, could you remind us of the cap CapEx budget on the total CapEx budget as that has that evolved? Is that under review and kind of looking out to 2025 and beyond, what would be left in terms of capital expenditures at the end of this year? Thank you very much.

Mark Spurbeck

Yes, Lucas, I'll break that down. So as we previously announced, the North Goonyella historical legacy portion of Centurion is that total CapEx of $489 million, $125 million of that has been spent as of 1231. We have in the budget $150 million for 2024 on, and that would leave about $200 million for 2025 for the North Goonyella side.
Now these awards well piece. We look to close that here in the second quarter of this year. We do have $50 million of capital development for words, well portions Cinterion in 2024 we haven't come up with the project CapEx. Beyond that, we're still still in the process developing an integrated mine plan, and we'll provide that guidance at a later date.

James Grech

And Lucas I'd like to add to that the CapEx, the portions of it that are associated with equipment and conveyors and so on and miners have pretty much been spent or ordered and those costs are known. A large part of what Mark is talking about is the development costs which get capitalized until we get to production. So as far as equipment and being exposed inflationary pressures. We feel that that's pretty much behind us. And we feel pretty good about those capital numbers because again, it's mainly associated with development going forward.

Lucas Pipes

That's very helpful. Thank you for that. I'll squeeze one one last theme and it's around your balance sheet and capital returns. So kind of three pronged question. I tried to be brief, but congratulations on the revolver, how does that fit into kind of your capital structure going forward? Does that unlock additional capital return opportunities? And related, how do you think about what kind of cash on your balance sheet today. Is that is that the right level going forward again, that kind of ties into the revolver, of course? And then how should we think about net interest income, our expense, given given that cash balance would appreciate your thoughts on that.

Mark Spurbeck

Yes, I use that kind of three questions in there. And the last one, Lucas, I'll happy happy to answer those questions, though, and I'll start industry mind that everything we've done from a balance sheet perspective over the last two years has addressed the evolving capital markets where industry which operates with above average volatility in both demand and market pricing, we will not risk the Company's financial strength, and we took an opportunity to solidify our financial resiliency for the inevitable dips in the market. With this new revolving credit facility.
We think that was particularly prudent during the development phase of ensuring our premium seaborne metallurgical coal growth engine the revolving credit facility does provide an attractive opportunity to utilize it for letters of credit for surety and other commercial requirements, something that we would be particularly comfortable doing kind of a Tier one met coal mine with a 20 plus year life. I will add that Moody's did take note bumped our rating up a notch. And while this financial strength comes at a cost of additional liquidity. We continue to benefit from lower surety bonding fees, lower FX hedging costs as well as lower D&O premiums. So there is a there is a net benefit there.
In addition to the interest income that you mentioned, we did, I think treasury like yields, so at today's market is probably 4.5% to 5% is a good market to use on those MS cash balances.

Lucas Pipes

Got it. Okay. That's some that's helpful. I leave it here and for now. I appreciate it and best of luck. Thanks.

James Grech

Next question, please.

Operator

Katja Jancic, BMO Capital Markets.

Katja Jancic

Hi. Thank you for taking my questions. First, just to confirm, you expect Shoal Creek to add 1.5 million tonnes this year?

Mark Spurbeck

Yes, we haven't we haven't provided guidance on individual mine level, but that's in the right ballpark.
Are we at a really good start to the quarter. We probably think production probably in that ballpark.

Katja Jancic

And can you just remind us what is the production capacity at Shoal Creek at this point?

Mark Spurbeck

Max and the mine has done more than 1.5 historically point, given where we're at in the mine geological conditions, we're comfortable those well.

Katja Jancic

Okay. And then just quickly you the major project CapEx is at $235 million. And I think you mentioned the Cinterion is about $150 million. Or can you talk a bit about what the rest that is and what are some of the other projects included in that?

Mark Spurbeck

Yes, there's there's $150 million for the North Goonyella portion Cinterion. There's about $50 million for the awards well portion of that, assuming we get that closed in the second quarter, there's also probably $15 million, $20 million down. And the Wambo open cut joint venture that that we're less runway.
Glenn QUARTER.

Katja Jancic

Okay. Thank you very much.

Mark Spurbeck

You're welcome. Thank you.

James Grech

And I think we can take the next question.

Operator

Nathan Martin, Benchmark.

Nathan Martin

Thanks, operator. Good morning, everyone. Thanks for taking my questions from me. I'll start on the seaborne thermal side guiding to 9 million to 11 million tonnes of exports there.
And what's the approximate production split between the high-quality tonnes you get the New Castle Lite pricing and the higher ash, lower quality product at prices of API. two, I know you guys you mentioned in your release on the split is roughly even on the unpriced tonnes. But just specifically wondering on production between Guam and Wilpinjong this this year? I think, Mark, you might have mentioned some positive sequencing and along the lines there. And then how do you guys see going forward the overall production levels and quality splits of that segment changing over the next several years, given some of the expansion projects, I believe you've talked about you're working on and I'll take that first question.

Mark Spurbeck

And you're right, there's some better, a better Newcastle spec product this year on an overall portfolio basis, just given the mine sequencing at the open cut, I'm probably looking somewhere in the neighborhood of 0.5 million to 5 million tonnes of Newcastle spec products, which as you know, are all export.

Nathan Martin

I can understand, and any thoughts on how the splits and the production levels in that segment trend over the next couple years? Just given some of the projects, it looks like you guys are working on.

Mark Spurbeck

So while we haven't given any guidance beyond 24, I will say that the outlook is fairly stable for the next several years. There are extension projects that are under study, we haven't announced anything, but as we get further down the road and complete those studies, we'll be updating the market.

Nathan Martin

Okay, got it. And then maybe over to the Met segment quickly forecasting out the quarter-over-quarter drop their shipments, I think, to 1.4 million from 2.1 million in the fourth quarter. Maybe get a little more color on that expected decline in vessel timing. Is that something else? I know, Mark, you mentioned you're keeping an eye on the locked outage at Demopolis as well to any additional thoughts there on maybe are you investigating any transportation alternatives? If that continues, then that cost per tonne side, I'm assuming your expected shipments driving that range higher for the first quarter versus the full year range. But any thoughts on maybe how you expect both those items Met segment shipments and cost to trend throughout the year on any other longwall moves are so flat? I think you flagged one in the first quarter?

Mark Spurbeck

Yes, I'll start with the volumes just address the first quarter. Some of that was covered in my remarks that this is a typical or I should say we've hit we've had that we've experienced the last couple of years from really there's a longwall move at Medtronic that's bringing down some first quarter volumes and then there's just typical mine sequencing at the CMD. We did have a absolutely fantastic fourth quarter, but just where they're at in the mines in the pit that there will be a lower production coming in the first quarter. So it is less than ratable similar to last year. Circumstances on that it will increase as we go throughout the year to make up that full balance of.
And then, Jim, you want to cover the lock issue?

James Grech

It was the was the lag issue. The timing that we have the industry has from the Army Corps of Engineers for the locks to be back in service sometime in been make. That's their current estimate. And so in the interim, we've made alternate transportation routes. We've got two different ones, ones, all all barge and New Orleans, barge and rail that we're putting in place to keep the call moving. We don't see that impacting our first quarter volumes or our full year volumes for Shoal Creek sales volumes. We do think there may be a dip in the second quarter, depending on now what gets back in place with the sales tonnes in the second quarter. But again, it won't affect the full year sales numbers or Shoal Creek.

Nathan Martin

Very helpful color, guys. Thank you. And then maybe just one more looking at the U.S. thermal business, you flagged how low nat gas prices, high stockpiles are are weighing on demand or did a couple of contract buyouts, I think so. And if I look at PRB in particular, a fantastic year for you guys from that segment on guiding to sales that are maybe only down 1 million or 2 million tonnes, I think at the midpoint year over year. Obviously, you've already contracted 85 million tonnes there as well. So maybe can you talk about how conversations have gone or are going with your utility partners out there? And whether or not you feel like there could be pressure on that number eventually, just given the current market dynamics we're seeing.

Malcolm Roberts

Yes, I mean, I'll take that one. We're very comfortable with the way that we sell and the level that we sell to. I think in terms of the market this year, we might see the generators going to the spot market to a lesser degree than I have in previous years, but we're pretty comfortable with that contracted level and getting that delivered.

Nathan Martin

Thanks, Malcolm. I appreciate that. I'll leave it there. Very helpful for everyone. Thank you for your time and information and best of luck in 24.

James Grech

Thank you so much. And have the next question, please.

Operator

Chris LaFemina, Jefferies.

Chris LaFemina

Thanks, operator. Hey, guys. Thanks for taking my question. So just actually a couple of questions around the met coal business and around capital allocation. So you have the ramp-up of North Goonyella, which I assume is going to be premium low-vol product that gets benchmark pricing. Is that accurate It absolutely does not get any of that in my opinion.
And a lot of people's opinion is that this is the supreme call on the top level co and most likely at the top level or at a premium? And is that true over the reserve life of the asset? Or does the quality degrade over time? And that's very true, often the asset type in the words?

James Grech

Well, the words well, a reserve addition is the same type of quality. So we don't expect any degradation in the quality. And as we transfer from the old North Goonyella reserves, to the words well, reserves, the same quality.

Chris LaFemina

That's very encouraging. So the markets are beginning to believe in kind of stronger for longer net coal pricing and you're generating cash flow and now you're pivoting to growth in met coal, you have fairly substantial organic growth. But would you consider looking at M&A opportunities, particularly in coal if they were to arise or is really the focus now on delivering the organic growth projects and continuing with capital returns?

James Grech

Yes, Chris, our focus is on and then delivering the cap, the shareholder returns and the organic growth is always the top of my list because it's the least risk. We have the most control over that, and that continues to be our focus internally.
Now as M&A comes along, we opportunistically look at anything that comes our way. We always take a look at it, Chris now and how active we are a different thing. But as things come our way, we take a look at it and then make a determination if it could benefit our shareholders and not, but it's down the list organic organic opportunities are at the very top of the list.

Mark Spurbeck

Yes. What's nice about the buyback is that you're basically increasing your production on a per-share basis at a low valuation and as you're ramping up the met coal volumes and reducing your share count, the deleverage of the met coal market obviously becomes much greater.

Chris LaFemina

So just an observation. We definitely like that and good luck with it all, and thanks for taking my questions.

James Grech

Thank you, Chris. That's the exact same observation we have to do.

Mark Spurbeck

Thanks for your comments, and I think we can take the next question.

Operator

Michael Dudas, Vertical Research Partners.

Michael Dudas

Good morning, um, two questions. First on your thermal U. S, Jimmy, you mentioned about some and we've seen in the market some coal plants, closures being deferred, given the dynamics on grid reliability, et cetera. Maybe you could share with us like relative to maybe six, 12 months ago and how you're looking at your customer base? And has there been any major changes on over the next several years or maybe even sooner the retirement on your customers and where you're selling the coal. Has that changed that maybe to lengthen the opportunity to monetize your reserves in the U.S.? Just wondering about that.

James Grech

It might be the discussions we have with our customers is one of the things that we've noticed that now desires to have longer-term contracts put in place because of the combination of the concern about the reliability supply and the potential for plants having longer lives than was originally thought to be the case. And I would say that the conversations we're having with our customers. And what we're seeing is a plant that maybe we're going to close in the next few years, looking at I'm going out to 29 or 30. It's not a nobody's making commitments or predictions beyond that, but it is a very good trend to see that I see that occurring.
And again, Mike, as I'm sure you know, the issue is reliability, right? The reliability of the grid backed up by baseload power and the need to keep these plants around to do that. So it's an encouraging start getting getting us through stronger through the end of this decade and we'll see where it leads to from there are the sufficient to start.

Michael Dudas

Secondly, um, as you know, the market intelligence on your part, as you look out maybe to the second half of this year, do you think there's better chance for the thermal markets to recover nicely or see pressure on the seaborne met side, um, given where fundamentals fundamentals are, I agree with Chris has thought about the shortage of the stone scarcity of met coal. But how are you thinking given what you're seeing and others relative to, of course, the high inventories and gas prices, how that plays through with on the supply side and such or for some move over the next six, 12 months?

Malcolm Roberts

Yes, Mike, the forensics and make sure we got the question question clear, are you talking about seaborne thermal and seaborne met and they escalate at Ryman?
Yes. Thank you. I'm sure I'll take that some. When it comes to the seaborne met market, we're quite encouraged by what we see we saw during Q4 with increase to AMP's crude steel production rates outside of China, and we expect those rates to continue during during Q1 and into Q2. And we also are encouraged in the metallurgical coal space play very constrained supply. So supply has and go back to those 2019 levels, which we'll use as a bit of a baseline to look at that. And we still see supply challenge moving through 2024.
Turning to thermal coal, Newcastle coal, please, in solid demand. However, at times, we get a little ahead of the demand. So where we sit right now with prices around $120, we think that supply is a little ahead. We had quite a strong supply growth out of out of East Coast Australia in Q4, but we think the prospects for Newcastle, thermal coal, and that's the coal that we that we really put into the export market improve as we move through the year as you know, we still have inventories to be taken down in the Northern Hemisphere. So again, we're optimistic about the rest of the year.

Michael Dudas

Sure, Malcolm, thank you very much.

Malcolm Roberts

Thank you.

James Grech

Operator, we have another question.

Operator

Lucas Pipes, B. Riley Securities.

Lucas Pipes

Thank you very much, operator. Thank you very much for taking my follow-up question on my first one is on Wilpinjong. I looked at the technical report some time ago, and that's last year's technical report, I believe, and it showed kind of lower volume starting this year. And I wondered if you could maybe comment on that. I guess we'll get an updated version with the 10 K, but if you could maybe comment on kind of mine of life at Wilpinjong and your outlook on production for this year and the coming years? And then I guess you have to kind of net debt against what goes domestic versus export. So if you could comment on that and kind of the the net contribution of Wilpinjong to your seaborne thermal portfolio over time, it would really appreciate the color? Thanks.

James Grech

Yes, Lucas. We'll start, Malcolm, talk about the contracting of the domestic versus the export and some color on that. To the extent that we can talk about that. And then I will follow up with your question about the reserves and the outlook. So Malcolm, if you could offer.

Malcolm Roberts

Yes. Hopefully as we move past 2020 and 2027, 2028, the proportion of export coal we expect to increase. However, there are semi and extension options and production options to increase our bid on that as well at Wilpinjong, which we can.

Mark Spurbeck

Yes, we've got a very busy drilling part in their plan year over year. We're probably looking at the, you know, it's only about three, 400,000 tonnes later on in 24 versus 23. And so and smart consistent, I would say, export pipelines are probably similar year over year as well. So pretty consistent performance there. And obviously, we already mentioned the better performance out of a lot of time increasing the proportion of new guests.

Lucas Pipes

Got it. And should I think about kind of the higher output VERSUS, the prior plan is as efficiency gains on anticipated kind of optimization opportunities? How should I think about that?

Mark Spurbeck

Yes, I think it's a combination of both of those things Lucas, we continue to mind I have various looking forward going out beyond 24. Certainly their studies. We talked about that earlier that we are we are conducting There's ups. There's several expansion opportunities, and we'll continue to study those. And when we get further down the line, you'll see an updated production profile and a technical report.

James Grech

So Lucas, maybe I'll see if I know Wambo underground would come out of that longwall move at the end of last year in the longwall running this year to I'm not sure what timeframe you're talking about with the tonnage profile yet at least establish kind of helping young over the next couple of years to negotiate with them.

Lucas Pipes

Yes. No, very, very helpful. I appreciate that discussion. I guess some helpful context and a follow-up on what's Well, I think earlier you mentioned $50 million of capital this year. I wondered if you could maybe expand on that. What you would envision to invest in with that capital is at machines? Is it infrastructure for the eventual extraction of those reserves? Would appreciate your comments on that.

Mark Spurbeck

Yes, I think it's a combination of both Lucas. I mean, there will be some certainly will begin driving an underground development towards those reserves, which is well capitalized. So that's the preliminary estimate of $50 million for 2024.

Lucas Pipes

Okay, that's that's helpful. And then on on the domestic side, I wanted to kind of ask about your contract portfolio beyond this year.

James Grech

It can you can you frame up kind of where where the book stands as a percentage of this year's production for 2025 and ballpark, what sort of pricing direction should we anticipate Yes, Lucas, for 2025, our domestic book right now, if you look at the PRB and we gauge it against the midpoint of the guidance this year, we're better than 60% committed and on the other U.S. thermal same way, if you look at the midpoint of guidance for this year and you take that to 2025, we're about 75% committed, and we have not yet issued any outlook on pricing for 2025.

Lucas Pipes

All right. I appreciate it very much Asic. Again, best of luck.

James Grech

Thank you.

Operator

That concludes our question and answer session. I would like to turn the conference back over to Jim Grech for any closing remarks.

James Grech

Well, thank you all for joining us today and I'd especially like to thank our employees for remaining focused on safety and for continuing to execute on our various initiatives. I'd also like to thank our investors, customers and vendors for your continued support. Operator, that concludes our call.

Operator

The conference has now concluded. Thank you for attending today's presentation, and you may now correct.