Ladies and gentlemen, thank you for standing by, and welcome to the Peabody Energy Q3 Earnings Call. For the conference, all the participant lines are in a listen-only mode. There will be an opportunity for your questions. Instructions will be given at that time. (Operator Instructions) As a reminder, today's call is being recorded. I’ll turn the conference now over to Mr. Vic Svec, Senior Vice President, Global Investor and Corporate Relations. Please go ahead.

Okay, thanks, John, and good morning everyone. Thanks for taking part in the conference call for BTU. With us today are Chairman and Chief Executive Officer, Greg Boyce; President and Chief Operating Officer, Glenn Kellow; and Executive Vice President and Chief Financial Officer, Mike Crews. We do have some forward-looking statements. They should be considered along with the risk factors that we note at the end of our release, as well as the MD&A section of our filed documents. As always, we refer you to peabodyenergy.com for additional information. And with that, I’ll now turn the call over to Greg.

Thanks, Vic, and good morning, everyone. Peabody's third quarter results are accredited to the teams in the U.S. and Australia for a strong operating performance. Our continued drive to take cost out of the business had better than forecast shipments in the quarter. These clearly are challenging times, but for those of us with a longer time horizon in the resources sector, we know that the industry has faced major downdrafts before. Peabody is doing what it takes to carefully manage through current industry conditions, and we expect to come out stronger and more competitive on the other side of this cycle. Today, I'd like to begin with a perspective on the current industry forces at play, and then discuss Peabody's positioning and our path forward. Seaborne metallurgical coal market saw tepid Chinese imports and steel production growth, while India remained a bright spot. India's metallurgical coal imports increased over 20% through September, further indication of the country's strong reliance on the seaborne market to meet the vast majority of its metallurgical coal needs. On the supply side, lower prices have driven out capital and pressured high-cost operations. Peabody estimates that some 30 million tons of annualized metallurgical coal reductions have been announced in 2014 with more than 20 million tons of that capacity yet to be removed from the market over the next few quarters. The seaborne thermal coal market is experiencing a similar dynamic as easing China import growth is increasingly mitigated by growing India demand. In fact in September, higher India's thermal coal imports more than offset the decline from China. Recently announced coal quality restrictions and coal import tariffs appear designed to support China's struggling domestic producers. And while the net volume impact of these actions is unknown, they have clearly impacted near-term market sentiment. We…

Thanks, Greg, and good morning everyone. Peabody's strong third quarter results reflect the success we have made in implementing sustainable cost improvements across our 26 global mines and strong operating performance. Let me first start with a brief update on safety. Our Australian operations have had a record safety performance year to date, and we are continuing to invest in safety programs and systems across the platform. This includes proximity detection technologies, contractor safety programs, and other initiatives that's part of the overall NMA coal safety program targeted towards zero incidents. Turning to our mining platform, we are improving the way we manage our four longwall mines to maximize productivity, and we are seeing strong performance from our North Goonyella and Metropolitan longwall mines in Australia. Production is up more than 55%, and productivity increased 40% over the second quarter at North Goonyella. We are now focused on increasing uptime and enhancing yields, which we expect will provide further benefits. The scheduled third quarter longwall moves at the Metropolitan and Wambo mines went very smoothly, with Metropolitan reaching record production and size levels in August. The Company's U.S. platform continues to perform very well, even without performance issues that impacted our PRB shipments by approximately 2 million tons in the third quarter, while the shipments were offset by strong operating performance and cost saving initiatives. Across our global operations, we have remained focused on further improving productivity. I am pleased to report that productivity has increased 7% at our U.S. operations and nearly 20% at our Australian operations over the first nine months. Improved productivity, strong operating performance and continued cost reductions have all helped to mitigate some of the external market pressures. This is best reflected in Australia where despite a high metallurgical coal mix, cost per ton had…

Thanks, Glenn, and good morning. We were pleased that third quarter adjusted EBITDA came in above the high end of our increased guidance as dollar production and cost performance led to strong operating cash flow in the face of ongoing market weakness. I will first review our quarterly results starting with the income statement and then provide an outlook for the remainder of the year. Third quarter revenues totaled $1.7 billion, primarily driven by lower prices in Australia. Adjusted EBITDA of $216 million reflects our cost containment actions that Glenn discussed in detail which helped to offset the continued pressure from low seaborne market pricing. Taking a look at the major components of operating results, U.S. operations generated adjusted EBITDA of $282 million. Midwest revenues per ton declined 5% on the expected roll-off of legacy contracts. Stripping ratios improved in the third quarter at multiple surface mines in the Midwest compared to the second quarter, leading the cost per ton that were in line with the prior year. Western revenues per ton improved 3% as we benefited from layering in sales in prior periods across the region. Cost per ton increased slightly in the West as a result of increased sales related costs from higher pricing and a 2% volume decline due to continued rail performance issues. In Australia, adjusted EBITDA of $17 million reflects $130 million of lower seaborne pricing compared with the prior year as well as longwall moves into operations. Australian volumes increased to 10 million tons in the quarter. During the quarter, we shipped 4.6 million tons of metallurgical coal at an average price of $88 per short ton and we sold 3.4 million tons of seaborne thermal coal at an average price of $66 per short ton, with the remainder delivered under a domestic thermal…

(Operator Instructions) First we'll go to Michael Dudas with Sterne Agee. Please go ahead.

First one for Glenn, regarding your pretty impressive cost performance amongst your Australian mines, do you get a sense that the rest of the industry given where current currency levels are, and for you guys itself, is there much more owner-operator conversion or much more stronger cost-reduction opportunities to allow some of the thermal and met production to not come offline at the higher cost end of the curve and delay what could be an interesting price recovery?

Just in general, we probably wouldn't expect that Australia would be at the high end of the cost curve from a generalization from an industry's perspective. Focusing on Peabody, we certainly have benefited from our owner-operator program but in a way that meant that we were -- because we were previously contract mining, we're probably starting a little bit behind the rest of the pack. Now with 95% of our platform under owner-operator activities, we can expect to reap the benefits of that through the programs that we have outlined. We had a fair bit of success in cost reduction to date, but we still think that there is further benefits ahead in terms of our own platform from increasing productivity and continuing success of the cost activities that we have already outlined.

My follow-up is maybe for Greg on the Powder River Basin rail service, it seems like you were outperforming some of the other producers in the rail access with the ability to ship coal, but relative to the summer and the lack of availability, would the rail issue be much more keeping the utilities from wanting to lock in longer-term business or actually trying to replenish because you just have zero confidence in the rail companies to deliver the coal that they need?

I think, it's a two part scenario, Michael. I think in the very near-term, and we've talked about this in the past, we're not seeing much activity and that's probably affecting the OTC because near-term deliveries are still problematic. Everybody is focused on getting their contractual deliveries and additional volume as it becomes available on a railroad is going towards trying to maintain and meet those contractual requirements. But as our multiyear deal that we announced and talked about would indicate, utilities are looking through near term rail issues. We have seen these in the past, the railroad hires more people, they give more locomotives, and they debottleneck the track and the turnaround times, cycle times, and the system opens up. And so, utilities are really looking beyond that. So our multiyear discussions actually are stronger today than any kind of near-term improvement in end volumes. So when we talk about the potential for next year, not only do you have getting back to normalized utility demand so that we eliminate what's been going on with coal conservation, but depending on the fluidity in the rail system, there is a significant amount of pent-up demand to rebuild inventories. And then the third piece is we've got utilities that are now rethinking what is an appropriate level of normalized inventory. That really started with the polar vortex of last winter, but the rail issues have kind of compounded that thinking. So we see once the rail system opens up, strong pull for a number of years.

Appreciate your thoughts. Thank you.

Our next question is from Caleb Dorfman with Simmons. Please go ahead. Caleb Dorfman - Simmons & Company: Did youa already announced the production code for Burton operation. Is the process of looking at all the possible operations now complete or are you still considering additional production? I know you have already done a lot on the cost savings side, I don't know how that rolls into that thinking.

First I would say that the process is never complete. It's an ongoing process as the market moves, so we have to adapt to the market. And I think as we have talked before, the approach that we take is, where we get to a point with any operation where we believe that we have made all of the cost improvements, the operating and productivity improvements, and we can and we are still not competitive, we make those tough decisions to shut those operations down. We've done it here in the U.S., in the Midwest, we have scaled back Caballo in the PRB, we shut down Wilkie Creek and then of course the Burton announcement during this past quarter. Given what Glenn and the team are doing with our operations in Australia, particularly the met coal operations in terms of reducing those cost structures and improving yield and performance and productivity, we're at a position where we want to focus on that as task one, and as long as they are competitive, we will continue to manage and maintain those operations. So that's kind of the process that we go through. Can we go in and make sure that we have optimized those operations, and all of their aspects, once we get to that point, if they are not competitive, then we'll make the hard decisions relative to whether they continue to operate or not. Caleb Dorfman - Simmons & Company: Thanks. And I know that you mentioned the expected realizations in PRB could be higher in 2015 than 2014. Do you expect a similar margin expansion opportunity, or what further costs saving initiatives could we expect to see implemented in the PRB which could help margins actually expand?

Sure, this is Mike. We do expect to have higher realizations year on year based upon the contracts that we have layered in. The ultimate margin for '15 will depend on where we come out on the cost position and we're still in the know of the budget process. And it also depends on the volume that we have out of PRB and you are well aware of the logistical issues there. So it's a combination of volume, mix and ultimate realizations that will drive that margin.

The next question is from Brandon Blossman with Tudor, Pickering, Holt & Co. Please go ahead. Brandon Blossman - Tudor, Pickering, Holt & Co.: This is a follow-up on [indiscernible] question and to put a finer point on it, PRB pricing you could address indication year-over-year and indicate that prices are better than the screen would be showing, any kind of order of magnitude there or just maybe if not that just color on price sensitivity for the utilities when they are thinking about multiyear PRB contracts?

I think the best we can do in terms of the directionality, we have given you relative to '15 versus '14 on PRB, but the discussions with the utilities when you are talking with them, we have talked about this a lot over the years, when we are talking about large volume multi-year contracts, the discussions around pricing are much different than somebody that's coming in to buy one train for delivery this month. And utilities are looking for obviously certain quality parameters depending on the utility, they are looking for the ability and the surety to get deliveries and supplies from each of the producers. And then of course for each of the utilities, it depends on the rail network that they have actually contracted with. But when you look at a multiyear deal, the industries may give you some near-term direction and some direction in the market, but we have always accomplished a premium to those in terms of our multiyear contract sales. Brandon Blossman - Tudor, Pickering, Holt & Co.: Fair enough. And then just another kind of big question relative to the PRB. Given that strip ratios do as we know increase over time in the PRB, are you comfortable or even pleased with the direction of those multi-year contract discussions?

Yes, absolutely, I mean I would say that we don't enter into multiyear contracts if we are not pleased with the financial returns and the margins that we are going to accomplish over those multiyear. Then of course we look at what the long-term effects of increasing PRB strip ratios, I mean we look at the entire scenario out there, what it costs for replacement reserves, what our general recovery mechanisms are, all of that goes into kind of the expectations that we have for our multi-year improvements in pricing in our multi-year contracts.

The next question is from Evan Kurtz with Morgan Stanley. Please go ahead.

First question here is on the currency, pretty big moves since the last time we talked on the [AV] (ph), and I was just hoping you could provide some guidance how you hedged, what kind of exchange ratio we'd be thinking about for next year?

For next year it's interesting because we had actually slowed down putting on additional hedges, but because of the cost-containment efforts that base spend has come down. So we're pretty well back in a similar position where we normally be going into the next year. So we're about 70% hedged based upon our current estimates. So if you look at that relative to what the forward rate is for the unhedged piece, the all-in effective rate would be about 92 at current exchange rates, which is just slightly above where we are for 2014.

Got it, that's helpful. Thanks. And then going beyond that, are you hedged at all in 2016?

Yes, we are hedged at a lower, much lower level into 2016.

Okay. Maybe just one last one if I could. On the dividend, just wanted to [indiscernible] changed about that at all, assuming kind of worst case scenario and prices are stuck kind of near current levels for met and thermal in U.S., I mean you are pretty close to cash breakeven and maybe a little bit negative when you start to factor in LBAs, is it worth it to keep that 90 million dividend in place through that period or would you think maybe it's just better to keep the high-level liquidity on the balance sheet?

It's a fair question. It's something that we think about quite a bit. We recognize investors need and desire to have capital returns. At the same time you have to take into account the current economic conditions, our financial needs and then just investor expectations in general. So it's something that we continue to look at, we review it with our Board of Directors at least annually and sometimes more frequently. So it's something that you have to continue to evaluate based upon some of the pros and cons that you mentioned.

I would add, one of the things we want to do is make sure that we are not being too variable here. When you look at our fixed charges, we've got about $350 million of fixed charges that roll off after the next two years. That's the last two of our LBA payments in the Powder River Basin and the last of viva payments for the Patriot settlement. So once you get to say 2017 timeframe, our fixed costs if you will, including if we were to as you would look at including dividends, would be a substantially lower number. And so we not only look at the next quarter or the next two quarters but we try and look out over a little bit longer period of time and our focus is maintaining our liquidity which Mike and the team, between the operating performance and our relationships, we've been able to maintain strong liquidity.

Next we'll go to Brian Yu with Citi. Please go ahead.

On prepared comments you guys had discussed the China tariffs. I was wondering if you might be able to shed some light on what you guys are seeing from the trading operations, any near-term impact, the volumes, and how is that tariff being handled in terms of [who is] (ph) impacting, is it the buyers in the China side or the sellers bearing the burden of that tariff?

As you mentioned, we did see the impact of new tariffs being introduced for 3% for coking coal and up to 6% for thermal coals. The impact was actually muted somewhat by the largest [indiscernible] actually raising the domestic price which also offsets recent moves in the Australian dollar for the Australian production. So we have seen a little bit more of a muted effect coming through than what might otherwise have been expected because of that domestic position. Also looking ahead, we are aware that Australia is negotiating a free-trade agreement with China that could possibly include exemption of the tariff. And those following closely would be aware that Indonesia is already exempt which we continue to source coals through our coal trading platform.

Okay, that's helpful. So just so I understand it correctly, basically what you guys are seeing is domestically in China prices are going up, so that effectively at least for now offsetting any impact on the carriers for the importers?

Yes, I wouldn't suggest it's a full offset but certainly it has a muted effect as a result.

Okay. And then the separate question I guess just on CapEx, I know you guys get asked this a lot and you continue to reduce it, which is good because you have made all these investments in new equipment, are we getting to a point where you're kind of seeing that bottom of how much you could take that spending down by along those lines, when would we and should we expect to see an uptick in CapEx as those new equipments begin to age to a point where you're going to have to reinvest?

I think it's something that we continue to define going forward and I think we have been somewhat surprised by the success of the programs positively by the last couple of quarters and particularly as we move into further enhancements to our condition based monitoring activities. We are continuing to benefit from that well-capitalized platform that you've been talking about. I think the guidance that we have given would be pretty solid guidance going forward and at least to the period that the horizon that we have talked about in terms of our LBA payments beginning to roll off, so certainly into that through 2015-2016 into the 2017-2018 period.

Next question is from Timna Tanners with Bank of America Merrill Lynch. Please go ahead.

I wanted to ask you first you talked about pursuing further asset sales, so I was just wondering what color you can provide there and the receptiveness of the market in the current environment to these kinds of sales?

You make a couple of good points there. Over the last couple of years we've really made a concerted effort to try and monetize assets to generate excess cash flow to reduce our leverage position. We have had some success. I'll remind everybody we have sold about $175 million worth of assets, mostly reserves in the U.S. and Australia, since June of last year. We have also been pursuing sale of some non-core operating assets. But as you point out the market is pretty challenged and given the decline in the market conditions over the last 12 months we have said before we're not really looking to sell assets at the low cycle valuations. Wilkie Creek, we probably had a deal done, we got $5 million non-refundable payment for that but it did not close and we continue to look across our entire platform for additional, particularly these non-core reserve transactions where we can get respectable value from other folks who will value those as part of their portfolio. So overall, it's something we spend a lot of time on, we continue to work on, but we recognize it's a challenged market for asset sales right now and we are not wanting to go out and sell at the bottom of the cycle.

That makes sense. Okay. And the other one I had was just a follow-up. I know you gave the guidance for the end of the year, but just given that the end of year is quickly approaching, I was just wondering, I think I've asked this before, sorry, but can you give us some like framework for how to think about what could drive you to the high end of your guidance versus the low end, what are the big drivers as you look into the last couple weeks of the year?

I think we have also talked about the range and what drives of the range that we have for any given quarter and it's typically driven by shipment time and also production as we head into the end of the quarter, when you see this with the third quarter alone in terms of the guidance effect that we had raised and then had some continuous strong performance through the end of the quarter. So it's two of those and then we do have a longwall move in the fourth quarter at 20 miles, so it just depends on how that comes out in terms of the cost incurred, how quickly it can ramp back up online and regain some additional production.

We'll go to Justine Fisher with Goldman Sachs. Please go ahead.

Just a question on the significant PRB contracts that you signed, I know that you said that numerous utilities are out there kind of thinking about how they're going to treat their inventories, but do you think that there are a lot of opportunities like this out there in the market, i.e. I'm not asking you to disclose anything but your [indiscernible] I mean might we see some more things like this from other PRB producers in this earnings season, next earnings seasons where we do start to see numerous and large multiyear contracts being signed or do you think that this is kind of one interesting opportunity that you guys are fortunate to win?

I can't speak to others but we would not anticipate that this would be our last opportunity.

Okay. And then also can you talk about in the Midwest for the next quarter to where the strip ratio is going to go, I mean the costs are pretty impressive there this quarter now, I was just wondering how you expect those to [indiscernible], you were talking about PRB strip ratios earlier but I was wondering if you could comment on the Midwest?

Just give me a second, I'm looking at my notes. I think the high point on the stripping ratios was in the second quarter and we got past that which is why we saw benefit into the third. So I think if there's any uptick in the Midwest in the fourth quarter, it's going to be minor. There could be a little bit of strip ratio but it's mostly just timing of repairs.

Okay, thanks. And then I have one more question if you don't mind on payables, I know they were down a lot in the 6second quarter and then up this quarter, which I think probably helped the cash flow from operations number. Can you guys give us guidance as to whether we might see that go down again in the fourth quarter and how you're thinking about working capital for the rest of the year?

There were some benefit in payables, also inventory drawdowns and a little bit lower accounts receivable. So it was a combination of all the three. In terms of, I don't think we project that to significantly reverse into the fourth quarter. The fourth quarter cash flows are really going to be driven by, which I guess would impact working capital, would be the interest payments, the large interest payments are made in the second quarter and the fourth quarter, and then also the large LBA payments. Those would be the big drivers of cash flow in the fourth quarter.

We'll go to Jeremy Sussman from Clarkson Capital. Please go ahead.

In terms of your Aussie cost, I [indiscernible] trying to extrapolate into 2015, so obviously cost coming in at $66 a ton level versus your full-year guidance now at $70 which obviously includes the first half of the year which was above $70, I just want to get a sense I guess you said you are 70% hedged currency for next year, obviously it looks like that other 30% of it help flat stays in your favor, and it doesn't sound like there are a whole lot of unusual events in the third quarter, so I mean should we be thinking about sort of mid to upper 60s for cost next year with say all else equal and how should we think about that?

Jeremy, obviously it's a bit early for us to be giving specific guidance around cost, either in the U.S. or Australia and we look forward to providing everybody with our targets in our next quarterly call. But if you just look at the operating performance of the Australian platform for this past quarter as an indicator of what we think is the horsepower of that platform when we've got the owner-operator conversions behind us, when the longwalls are running well and there's not a lot of extra moves in the longwalls, and as one of the things that we are still working through next year in terms of how many longwall those will have based on our production volumes. So directionally, if you make your assumptions around exchanges rates being flat or hedged, and so you have got some, and no other major changes in fuel or any of those other consumables, you can look at we are going to have the normal pressures of geologic changes, strip ratio and/or yields on the underground operations. But we would look at the third quarter of this year as being a good solid strong quarter which indicates the strength of that Australian platform as Glenn and the team have got it running at a very, very strong level.

Great, that's super helpful. Just maybe a follow-up on the rails, could you just give us a general sense of whether you have seen some improvement out of one or both or sort of how we should think about that over the next 12 months?

It's interesting, I guess we would have liked to have seen more improvement by now than we have seen, although we have seen some incremental improvement, but what's really interesting is obviously the demand continues to rise or the anxiety level of utilities continues to rise in terms of the amount of coal that they want to increase. So it seems like the more we get ahead, the more we get behind. But we would anticipate through 2015 when you really drill down to the capital spend, the horsepower addition, the people additions, the two railroads are adding out of the west, 2015 we would anticipate to be a much stronger year.

Our next question is from Mitesh Thakkar with FBR Capital Markets. Please go ahead.

Congratulations on the solid quarter. Just a quick question, and Greg, you've touched a little bit on this, on the impact of diesel, we saw energy markets pull back a little bit. How should we think about sensitivity in terms of your PRB mines and even Australia, what's the impact of lower energy cost, if you can give us some sensitivity with respect to like a $10 a barrel change in oil including your hedge position that will be great?

This is Mike. When you look at 2015, a $10 a barrel change in price is about $12 million net of our hedge position. So it's a much smaller variability versus say our FX assumption.

Okay, great. And this is not just PRB, across your platform, right?

That's across the platform.

Okay, great. And just going back on the Aussie cost, if I remember this correctly, you guys had some longwall moves planned for the third quarter. A., were all those longwall moves completed during the quarter, is there any rollover in the fourth quarter? And just following up on Jeremy's question, I know you can't give me the exact guidance, but if you look at your third quarter or maybe your back half of 2014, is that more consistent looking into 2015 or are there things outside of FX and energy which we should be aware of, which we be cautious about not assuming part of annualizing it?

I might add to the first part and I'll hand over to Mike around the sort of the core of that. In terms of longwall performance in Australia, yes, those longwalls that we [had indicated] (ph) all went well, in fact we pointed to a record coming out of that at our Metropolitan mine in both production and sales. Mike talked about a move in the U.S. this quarter and that's on track and on schedule. Pass over on cost.

So back on the cost, you guided to $70, approximately $70 per ton for this year. As we look into '15 and I do, we'd be happy to provide you color when we have that color. We're still working through the budget process. But I mean the key levers are going to be stripping ratios tend to increase over time, so your overburden removal cost go up, you have inflation on your input costs, and then ultimately the mix of met versus thermal will have an impact as well. And then we will look to offset those inflationary costs where we can with productivity improvements. You'll recall we don't have the carbon tax in 2015 which we had this year. That's about $1 a ton benefit. And then we'll really look to see to get the annualized benefit of our cost containment activities in '15 that arose in '14 and we'll continue to look at additional cost reduction opportunities as well to keep that cost position in line.

Our next question is from Lucas Pipes with Brean Capital. Please go ahead.

Greg, you mentioned increasing demand for PRB as kind of as the wells are improving, yet when I look at your 2015 contract position I believe you're pretty fairly hedged out. Kind of how are you thinking about your contracting strategy in the current market environment?

First I would remind everybody the numbers that we provided, the 15% that we are hoping, is based on our 2014 expected volumes. So any growth that we get in 2015 we haven't yet added into our open position. And so we do have the ability to take advantage of a strengthening market in 2015. And it's really just going to depend on the curve of the recovery of the railroads as they continue to add people and add equipment and debottleneck the system. We anticipate there's going to be some of that and that's why we'll try and provide as much forward viewing as we can in January when we provide our 2015 targets. But that's kind of the difference between the 15% based on 2014 volumes versus what we might anticipate in 2015 and we're still going through all of that and still want to see how the railroads incrementally continue to improve going through the end of this year.

That's helpful, thank you. And then maybe to switch to the met coal market more kind of macro big picture, you reiterated some of the other estimates that we've seen, about 20 million tons of met coal production cuts taking place so far. How many of those do you think have been implemented up to this point in time?

I think our number was fully closer to on track on 30 million tons of announced cuts. We think about 10 million of those only have been implemented. So we'd expect to see further reductions as people work through the mine closures or mine suspensions, work through the inventory stockpiles they have been building up. They are still ahead of us, a vast majority of that will still be ahead of us in the coming quarters.

The next question is from Paul Forward with Stifel. Please go ahead.

I wanted to ask about the Wilpinjong permit issue, I guess you have been so productive at that mine so far this year that you are bumping up against the full year permit limitation. I was just wondering if you could talk about how firm those limitations are and can you put any numbers on maybe what the missing volumes might be in the fourth quarter relative to the run rate that we have already seen for the first three quarters?

it's unusual a good problem to have which [shows] (ph) a strong production performance that continues to go through the mine. We have two permit restrictions, one applies to the runoff mine activity, the other around the amount of rail restrictions. We are looking over time at ways that we can potentially increase those limits. The production impacts are included within that fourth quarter guidance number.

That's why you saw when we looked at the reasons we gave in the release around the key movers on our outlook for the fourth quarter, that was one of those along with little bit lower spot seaborne thermal pricing.

Okay. And you had mentioned 50 million to 60 million tons of PRB coal demand could eventually come back. Just wondering as you do that modeling work to say there's a certain amount of restocking need and then a certain amount of kind of growth demand, is there a sensitivity around that number on what natural gas might be or can you talk about what your gas price assumptions are in going into making that estimate of 50 million to 60 million ton recovery?

Basically, Paul, what we did, we got an assumption in there that gas will not displace PRB coal during the course of the next year to 18 months. As you know we have said that it's a 250 to 275 gas price that's required to begin to erode and displace PRB on a competitive cost basis. So as we looked at just what it takes to get the inventory volumes from less than 40 days by the end of the year to back up to 50 days in 2015, and then you look at then replacing the coal conservation, the coal has been lost this year, that 25 million tons or so, so far, the coal conservation which all would have been burned if it was available because it was all more competitive than gas. That's where we come up with that number, plain and simple. So we make the underlying assumption that gas stays above that 250 to 275 range to displace PRB coal.

Got it, thanks.

The final question will come from John Bridges with J.P. Morgan. Please go ahead.

Just wondering the pullback in the price received in Australia from 73 to 67, what were the drivers of that and how should we think about that going forward?

I'm sorry, can you repeat that, John, you cut out just a little bit there?

The price received in Australia down a bit in the quarter compared to Q2, just wondered what drivers of that was and how we should think about that going forward?

This is Mike. So we typically have some carryover volumes from quarter to quarter but with the rollover pricing we wouldn't have had that carryover benefit in the current quarter. That's the large component of the difference.

Okay, so is 67 a good number going forward bearing in mind fluctuations in the mix?

Yes, I mean you do have to keep in mind mix, so that would be the key driver of any bearing.

Okay. And then just following up a little bit on the Midwest strip ratio issue, you pulled back on that. Any sense as to where that's going to go next year?

Obviously we're still finalizing our operating plans and our engineering plans for next year, John, but I mean I think it's safe to say that almost all operations see increasing strip ratios over time, that's just the nature of the open cuts. So we will have directionally an upward trend. The magnitude of that at this point we're still finalizing our operating plans.

Okay. I'm just trying to get to the sustainable versus the unsustainable cost cut issues. Anyway, well done on the numbers there, guys, best of luck.

Mr. Boyce, I'll turn it back to you for any closing comments.

Thank you, operator, and I want to thank everyone for joining our call today. I'd like to extend my appreciation to all members of the Peabody team and really call out their outstanding efforts to lower cost and further productivity and setting higher and higher standards for safety performance. Obviously these actions will continue to help us maintain our financial health [focus time] (ph) and continue to position Peabody for the future growth and long-term value creation as these markets turn. So we appreciate your interest in BTU and we look forward to updating you on our progress. Our next call will be in the New Year. Thank you very much.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.