Good afternoon. My name is Keith, and I will be your conference operator today. At this time, I would like to welcome everyone to do Warrior Met Coal Third Quarter 2017 Financial Results Conference Call. [Operator Instructions]. Before we begin, I've been asked to note that today's discussion may contain forward-looking statements and actual results may differ materially from those discussed. For more information regarding forward-looking statements, please refer to the company's press release and SEC filings. I've also been asked to note that the company has posted reconciliations of the non-GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release, located on the Investors section of the company's website, at www.warriormetcoal.com. Here today to discuss the company's results are Mr. Walt Scheller, Chief Executive Officer of Warrior Met Coal; and Mr. Dale Boyles, Chief Financial Officer. Mr. Scheller, you may begin your remarks.

Thanks, Operator. Hello, everyone, and thank you for taking the time to join us today to discuss our third quarter 2017 results. After my remarks, Dale will review our results for the quarter in additional detail, and then you will have the opportunity to ask any questions you may have. It's hard to believe it's been less than a year for us as a public company. I hope that many of you are following us have a clearer idea of how we work and why our approach is distinct from other U.S. producers. From the onset of our journey with Warrior, we've done a lot of work putting together an operating assets and a capital structure that would serve our investors well, both in times that are good and in times that are not as good. The year-to-date has certainly been a memorable one for our industry, and we're all rapidly getting a taste for how Warrior can perform in periods of favorable pricing environments. After a strong pricing environment in the second quarter, market prices moderated somewhat in the third quarter. Overall, conditions were still very favorable to us and we moved to once again capitalize on the price opportunity for hard coking coal that has followed from this year's supply disruptions to U.S. and Australian suppliers and higher Chinese demand. As a result, our financial results for the third quarter remained quite strong. We generated net income of $120 million and adjusted EBITDA of $107 million. The key drivers behind our performance continue to be our highly flexible mine plan, a highly variable cost structure in areas like labor, royalties and logistics and a clean balance sheet. This allows us to provide for an agile operational response to movements in the index price for hard coking coal and…

Thanks, Walt. Warrior's results for the third quarter continued to track as we expected, reflecting not only favorable market pricing conditions and customer demand, but also the fundamental strength of our financial and operational structures. For the third quarter of 2017, net income was $120 million, or $2.27 per diluted share, compared to a loss of $34 million, or $0.64, in the third quarter of 2016. Adjusted EBITDA was $107 million in the third quarter and was dramatically higher than the adjusted EBITDA loss of $6 million in the third quarter of 2016. for the 9 months ended September 2017, adjusted EBITDA totaled $431 million. Total revenues for the third quarter of 2017 were $312 million, which included met coal sales of 2.1 million short tons at an average selling price of $144 per short ton. Total revenues in the quarter exceeded the third quarter of 2016 by $259 million, on a 279% increase in sales volumes and an 80% increase in average net realized selling prices. Our third quarter net price realization was 93% of the industry average index price. As Walt noted earlier, our price realization was lower than normal and was primarily affected by the timing of shipments in the quarter. Mining cost of sales was $189 million, or 63% f mining revenues, in the third quarter, compared to $52 million in 2016 driven primarily by the significantly higher sales volumes in 2017. cash cost of sales per short ton, FOB port, was $90 in the third quarter, compared to $87 in the same period of 2016, but the increases in the per-ton values being primarily attributed to the price sensitive components of wages, transportation and royalty costs. All three of our longwall operations were running in the third quarter of 2017, along with our 8 continuous…

Thanks, Dale. Before we move on to Q&A, I would like to provide a reminder of expected fourth quarter production and a brief update on how we are looking at the marketplace. While we have successfully completed one of the three longwall moves in the fourth quarter so far, we still have the other two moves to complete this quarter. As we have previously indicated, production in the fourth quarter will be the lowest of the year. However, we believe it will meet or exceed our targets and guidance for the full year. The completion of these longwall moves in the fourth quarter will position the company well heading in to 218 as we strive for production levels near our nameplate capacity. As we liquidated most of our extra inventory in the third quarter, our sales volume will be lower than the third quarter. It will still reflect good demand from our customers and should be equal or near our production levels for the fourth quarter. While we have successfully captured the upside and the strong pricing environment so far this year, we remain cautious about global pricing in the fourth quarter and further into 2018. most recently, prices have remained at elevated levels near $180 a metric ton, despite improving supply conditions in the U.S. and Australia leading to expectations that the fourth quarter industry index average price could be approximately $180 per metric ton. Near-term global pricing may be largely dependent upon Chinese demand and policies being implemented during the winter season. The full impact of China's 2+26 policy that began in October to reduce air pollution remains to be seen. The policy requires coke plants to increase coking times and operate blast furnaces under 50% utilization from mid-November through the winter season. These changes could reduce demand for coke and hard coking coal and create volatility in the seaborne markets heading into 2018. we've seen recent price expectations for 2018 range from $135 per metric ton to $150 per metric ton, well below where prices are today. In that price range, we expect to maintain good margins with strong cash conversion. In closing, we are pleased with our results for the third quarter and we believe we are on track to meet or exceed our goals for the remainder of the year. With that, we'd like to open the call for questions. Operator?

[Operator Instructions] The first question comes from Dave Gagliano, with BMO Capital Markets.

Thanks for taking my questions. I just had a quick one looking into 2018 related to the volumes. I understand obviously we've got the longwall move in the fourth quarter. We've had two quarters of close to two million tons of volume each quarter. How should we be thinking about quarterly run rate volumes after we come out of the fourth quarter? That's my first question. And then, the somewhat related question, can you tie in your volume expectations for 2018 into the commentary you just made with regards to the pricing outlook commentary that you made, as well?

This is Walt. Our run re, as we look into 2018, our goal is to get back to that nameplate capacity by the end of 2018, of 8 million short tons a year. We won't hit the ground running at that rate right at the beginning of the year. We still have two CM sections to get up and running at full capacity, one of them is being added between now and the end of the year, the other will start up after the beginning of next year as well as some of our units are not at top efficiency at this point. So we still have some growth to do, but our expectation is we'll be able to get – we'll get to that nameplate capacity late next year. And that's right in line with where we see the pricing for next year. We think that's a good range to be in.

Is there a obviously there is sensitivity to price. Is there a certain specific basin benchmark index price that we should be thinking about it would start to scale it back if things do really decline meaningfully at some point?

No, we've never talked about where our breakeven price is. And even in the price ranges that we're talking about , the company will do quite well financially.

Right, okay, perfect. And congrats on another good quarter in terms of execution thanks.

Thank you.

Thank you. The next question comes from Jeremy Sussman, with Clarkson.

Hi, good afternoon and thanks for taking my questions.

Good afternoon, Jeremy.

Walt, you guys have had, as Dave said, another solid quarter. I think costs have averaged a bit under $88 a ton through three quarters, which is I think kind of reiterated guidance of $89 to $95. I know you have a few moving parts with the longwall moves, but what would it take to get to, say, the midpoint or even the high end of the cost guidance?

Jeremy, what you have to remember is all those labor dollars, all those fixed costs just get spread across fewer tons in the fourth quarter with three longwall moves. So it's not about us spending more money; it's just about us mining less tons in the fourth quarter with the three moves. So that's what's going to drive that cost number and determine exactly where we end up in that range.

Okay. That's helpful. And maybe if I sort I shift gears on to the CapEx front. How should we kind of – once you get to kind of that eight million ton run range kind of back half of or towards the end of next year, is there sort f a right level of maintenance CapEx, maybe on a dollar per ton basis? Or how should we kind of be thinking about that on really a go-forward basis?

What we've said in terms of maintenance capital, it's going to be about $65 million a year in straight maintenance capital and then we don't have a budget finalized for next year, but we'll be looking at where the pricing is expected to be and looking at other discretionary items to determine whether or not this is the right time to be deploying additional capital on things like new set of shields on things like beginning to develop torquacity at Mine No. 4, things like that will determine how much above that $65 million rate that we will go. So it's about the coal price and about the timing on those types of projects.

Very helpful. I’ll move on thanks.

[Operator Instructions] The next question comes from Karl Blunden, with Goldman Sachs.

Hi, good morning guys, Karl Blunden here. Thanks for taking my question. Just a follow-up on the comments that were just made. As you think about the timing and the cost of the shield replacement, can you help us think through that and how flexible is that investment from a timing perspective.

Well, the timing in investments really goes to when we want to put those new shields in service. Heat shields last about 65 or 70,000 cycles. A cycle is every time the shield moves three foot. So we have some time left and some variability as to when we could do that. And we look at whether or not the new shields would make us even more efficient if we brought them online a little earlier. So the timing of that, we could begin to put money into those next year, have them delivered in 2019, and put them in service right at that point. Or if we needed to, we could delay that a little bit.

Gotcha. Thanks, guys. Just one more on the cost side of things. As you think about the operating costs and how those flex in volatility met coal price environment, how should we think about the lag as met coal prices potential come down? What's the lag there between that and then royalty costs and then also labor? And is there a reference that we should look at? You're charging customers based on three different methodologies. What's the methodology used in those contracts that we can refer to?

Well, the royalties will happen real-time on a month-by-month basis, and the rail rates will also happen real-time on a month-to-month basis. Labor lags about two quarters. So when it hits a point where it would step back, that would lag two quarters. When it hits a point where it would step back up, that would also lag two quarters.

That’s helpful. Thanks very much.

Thank you.

At this time, there are no further questions. I would now like to turn the call back over to Mr. Scheller for any closing comments.

Well, that concludes our call for this afternoon. Thank you again for joining us today. We appreciate your interest in Warrior Met Coal.