Hello, and welcome to the Hallador Energy Company's Announces Fourth Quarter 2023 Earnings Call. My name is Harry, and I'll be your coordinator today. [Operator Instructions]. Now I'd now like to turn the call over to Becky Palumbo, Investor Relations, to begin. Please go ahead.

Thank you, Harry. Good morning, [indiscernible] Hallador Energy's call for the fourth quarter and full year 2023 [indiscernible] today are Brent Bilsland, our President and CEO; and Larry Martin, our CFO. Yesterday afternoon, Hallador released its fourth quarter and full year 2023 financial -- in a press release. Today, we will discuss those results as well as our perspective on current market conditions and outlook for 2024. Following our prepared remarks, we will open the call to answer your questions. Before beginning, a reminder that some of our remarks today may include forward-looking statements subject to a variety of risks, uncertainties and assumptions contained in our filings from time-to-time with the Securities and Exchange Commission and are also reflected in yesterday's press release. While these forward-looking statements are based on information currently available to us, if one or more of these risks or uncertainties materialize or if our underlying assumptions prove incorrect, actual results may vary materially from those we projected or expected. In providing these remarks, Hallador has no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future results or otherwise, unless [indiscernible]. Lastly, Hallador will file a Form 10-K sometime this week. And with that said, I will turn the call over to Larry.

Thanks, Becky. Good afternoon, everyone. Before we get started, I would like to make a definition of adjusted EBITDA as operating cash flows less the effects of certain subsidiary and equity method investment activity plus bank interest less the effects of working capital period changes plus cash paid on asset retirement obligation reclamations plus other amortizations. For the fourth quarter, Hallador incurred a net loss of $10.2 million, $0.31 basic earnings per share and $0.27 per diluted earnings per share. For the year ended December 31, 23, we had $44.8 million of net income or $1.35 per basic earnings per share and $1.25 for diluted earnings per share. We had adjusted EBITDA of $1.7 million for the quarter and $107.3 million for the year. We increased our bank by $29.8 million for the quarter and $6.3 million for the year. Our funded bank debt as of the end of December 31 was $91.5 million. Our letters of credit were $18.6 million. Our net funded bank debt was $88.7 million. Our leverage ratio for debt to adjusted EBITDA was 1.3x at the end of the year. I will now turn the call over to Brent Bilsland, our CEO.

Thank you, Larry. First, I'd like to thank the Hallador team for their hard work and dedication on finishing a solid year for our company. While the fourth quarter highlighted some operational challenges and the episodic nature of our power revenues, I don't want those challenges to overshadow the positive year that we had as a company. In addition to near record margins in our -- on our coal division for the full year, the continued integration of Hallador Power into our portfolio with the springboard to record net income, our highest revenues ever and a future sales book that is approaching $1.5 billion and continues to grow as demand for energy and capacity increase. We are seeing success in selling contracted contingent energy at excellent prices. And in light of that, we are also focusing on capital expenditures to prepare the plant to support those contracts in future years. We are also very excited about our recently signed agreement and structure with Hoosier Energy and their distribution member, win, REMC that should allow us to attract industrial users of power, such as data centers, AI providers and power dense manufacturers to the Merom property. We believe leveraging our plan to help supply these large users of energy should allow us to operate the plant more efficiently in a volatile power environment and generate increased margins at or above what we can achieve in our -- in the traditional wholesale market. We are already seeing increased interest and excitement around the prospect of this type of offering. If we succeed in attracting high-powered demand customer through this structure, it moves Hallador up the electricity value chain providing additional margin and stability to our earnings for years to come. Combined with our increased volume of Ford power sales, we believe these…

[Operator Instructions] And our first question today is from the line of Lucas Pipes of B. Riley.

I first wanted to touch on the liquidity and how you think about it. So the ATM a little bit late last year, earlier this year, they were the unsecured notes. Do you manage to a minimum cash balance or minimum liquidity balance? I would appreciate your thoughts on that.

Well, I think -- look, we are -- in this -- until we finish filling out our sales book, which we think we have enormous opportunities in front of us to add to that position this year. There's a lot of RFPs out, a lot of interest but in the meantime, we're very subject to spot prices of power, which is very much influenced by the weather or like there -- so when we think about liquidity, you can never have too much, right? But that being said, I mean, we are -- our Board of Directors on roughly 31% of the shares. And so our interests are very much in line with the shareholders because we are substantial shareholders, including myself. And so it's a balance. We have to look at what do we think power prices will be for the year? And how much liquidity do we need to fulfill our obligations of improving the plant keeping the coal mines up in tiptop shape. We probably had about as much as it could go wrong in the fourth quarter went wrong, right? We had half the plant off-line. Part of that was planned. Part of that was off unplanned. We had moved a lot of equipment around at the coal mines, trying to get all 7 units in better production. And finally, in February, decided we were going to focus on our 4 best units of production, and we were going to buy some coal from third parties. And so there's just a lot that goes into that question. I don't think we have an exact target number. I think it's more -- we're looking at our sales book and what the opportunities are and where we can get comfortable with margins locked in contractually in managing the liquidity until we reach that point in the road.

Got it. Really appreciate -- really appreciate that. And turning a bit to kind of the Q1 outlook. You already mentioned the weather hasn't been supportive. What insights would you be able to provide here at this point as it relates to Q1? How much of those issues kind of continued into the quarter. It sounds like they did at least on the coal side. And for the full year, what sort of volume should we anticipate at this point? And then on the power side, is that part of the discussion around kind of filling out the sales book? Or was that really more in regards to coal?

All right. So I'm not sure I got all your questions, Lucas. On the sales book, where we see opportunities is, look, the market is short capacity, right? We've seen these power generation supply has been relatively flat for about 20 years. And then we've been in this transition period of maybe a decade of closing baseload and replacing it with non dispatchable resources. And that has shrunk the accredited capacity. And I mean, MISO says, they've got some reports out that, say, in the next couple of years if people retire assets. As announced, the reserve margins go negative. So that won't happen. So but it just kind of shows how tight the situation has become from a generation point of view, particularly in MISO. And now you add in this explosion of AI, right? Mean the growth in that industry is just kind of unprecedented, right? And there's all sorts of reports. So I don't really know which numbers to believe. But essentially, these companies that are trying to race to develop AI, they can't find places to plug in. And so their short capacity, we happen to be long capacity. And this is kind of happening everywhere, right? We've talked to a lot of different utilities about where they have interest in selling there are other plants to us. And there's always some interest out there. But what's also been surprising is how many have said, yes, we know we show a retirement date and we're going to push that out because we're seeing all of this new demand suddenly show up from manufacturing from Europe, from AI, from EVs. So it's -- the long-term trend from us, we are extremely bullish. The short term, we're depending on weather in the spot market until we feel this…

This was very helpful. The third one, was on the outlook for Q1 and the full year. I do have another question on the MOU. So maybe since you mentioned it, I'll raise this one first. Is this an MOU for behind-the-meter power essentially? And then how quickly do you think you could see something materialize and I'd assume you'd have some construction that would need to take place the build out of a data center, what have you. So kind of best case, when could you supply power to a customer?

Yes. So we will go out for RFP this spring, hopefully, next month. We're trying to get that in order to see what the demands of the markets are. We have, I think, a fair amount of flexibility on what we can offer customers. And quite frankly, I don't know what the build times will be. We've had some customers without an RFP knock on our door, say they'd like to begin construction in 3 months. I think that's probably too aggressive. Could we see something as early as next year? Possibly. But we're not really far and off along in those conversations to give any guidance around what the timing is. I think what we're excited about is just what we've seen other companies do both in Indiana and throughout the Midwest, we've seen some really large developments and those prices don't get published, but they do get whispered and if that holds true, we're excited about what that could potentially be. Again, until we see an RFP results, it's really hard to say. We're just excited about the opportunity. And then as far as our first quarter, we saw one week of really cold extreme weather. So the power plants performed well through that period, and that was a profitable time. And the rest of winter so far has been extremely mild. I mean, it's -- we've had some 60 and 70-degree days in both February and March in Indiana. So we don't know what that means. We're heading into the shoulder season here next month. That traditionally is low power demand, but winter is traditionally high power demand, and that hasn't proved to be the case. So we'll see if this turns out to be a hot summer, we're encouraged by we've got extremely cheap gas today. And then when you start to get out to October, November, we have reasonable gas prices again up in the 3s and $350 range every month thereafter. So the power curve is seeing that, and it has remained robust so far but short-term prices have been cheap. And so we'll just manage through that. And that's why we're going to -- we will keep a very close eye on liquidity to make sure that we are successful. And there could be some opportunities again here with the MOU that we just signed.

Yes. Directionally, would you expect Q1 to be worse than Q4?

Well, I'm not prepared to give guidance on Q1 at a 10-K earnings call. So we'll wait and see what those results are. Quarter is not over.

Helpful. I'll do one last one. Why was it necessary for Hoosier to be part of the MOU?

So we, as Hallador, are only allowed to sell wholesale power. And when you start attracting customers for data centers and what not, that is industrial power. And so that technically has to be sold through a structure that involves Hoosier and their distributed cooperative win REMC. And so we basically negotiated with them for a period of time to say, hey, there's an opportunity here for everybody. Let's work together and see if we can have success. And those guys have just been terrific partners every step of the way and continue to do so. And as such, I think we have a real opportunity to not only create value for Hallador but create value for or when REMC and their customers.

Got it. Really appreciate all the color. Brent, to you and the team all the best of luck.

[Operator Instructions] It seems we have no further questions in the queue for today. So I would like to hand back to Brent Bilsland for any concluding remarks. My apologies, we have just had a question registered. And we have a question on the line here from Robert Lietzow

It's Roger Zigler individual investor. So in recapping -- the -- and one question and a comment. Is there anybody else in the coal industry who is making or has made this transition to integrated -- vertically integrated independent gold producer. Or power producer as you are. That's my first question, I guess.

It's a good question -- to my knowledge, Hallador is the only company that has acquired and has interest to acquire more coal-fired power plants and a public structure. And so we're happy and excited about what we were able to do at Merom. We think there are other possible opportunities out there to replicate. And so we will -- but as far as other people in the industry doing this, I know of some others that are buying plants in a private structure, but I'm not aware of anyone doing it in a public structure. It's not to say it doesn't exist just to say, I'm unaware of it.

Okay. And I think you've pretty much answered this, but just for how we should think about the, say, the 2024 outlook, there's some tremendous opportunities. It sounds like you're really building for like on a 3-, 4-year build-out but the -- is it as simple as if you get in Indiana and maybe the surrounding power areas get it finally get a hot summer following the second warm winter in a row? Is that going to just be like it's going to springboard nat gas, coal and your power markets considerably, correct? I mean is it that simple?

Yes. I mean power market is going to move so quick. I mean we can see spot prices one day be $20 a megawatt hour and 3 days later, they're $250. I mean those are weather-driven events. We're trying to get to a contracted sales book, and we're having a lot of success to do that and doing so. And we have a huge amount of business out for bid as we speak. But we'll see how successful we are in securing those contracts. But I think we have multiple customers, multiple avenues, particularly with the MOU now to add to that. And what excites us is we see Hallador and its traditional margins that it made in coal. And then we see what -- if you look at our sales table, in the 10-K when it gets published in the next day or so. Look at the pricing for power, particularly when you get out in the ' 26,' 27, ' 28, range, our margins are dramatically higher, and we think we can continue to have success contracting for power and capacity at higher margins. We haven't gotten our sales book filled out as fast as I would have liked, but I think our team has done a terrific job. And the way we're going about it, and you have to find willing dance partners and they're showing up. It just takes more time because it's a very bespoke process and filling that out. And so our earnings are going to be a little episodic depending on weather here for the next handful of quarters, we were -- the market changed so dramatically from our earnings call in November, what we saw the power curve there for December, January, February versus what it actually ended up being was completely…

Yes. To say your basically spring loaded is seeming to be an understatement with the things you have in place here. So good luck on that. And appreciate it.

Thank you. And we have no further questions in the queue. So I'd now like to hand back to Brent Bilsland for some closing remarks.

I want to thank everyone for taking the time today to tune into our call and your interest in Hallador Energy. We greatly appreciate it. Thank you.

This concludes today's call. Thank you all for joining. You may now disconnect your lines.