Investors in Patriot Coal Corporation (NYSE:PCX) have had a tough year. A year that has seen shares in the coal concern drop over 73% over the year ending on Friday, July 5th. Today, however, things went from bleak to coal black as the stock closed at $.61 following the announcement and an intraday trading high of $2.09.
However, this may be more than the death of Patriot Coal Corporation, it is possibly the death throws of an entire industry as domestic natural gas exploration has risen to levels unseen in nearly four decades, driving the price down even further than originally imagined. Natural gas is being found nearly everywhere in America, and overseas as well. The price of natural gas is now 50 times as cheap as the price of oil.
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Additionally, if an increase in warmer winters remains on the horizon, and regulation continues, the coal industry may finally be on the outs. U.S. coal use dipped to a low unseen since since 1988 in the first quarter of 2012, and utilities moving towards natural gas seems to be an irreversible trend as it becomes more cost effective and the more environmentally conscious consumer grows wary of big coal subsidies.
“The coal industry is undergoing a major transformation and Patriot’s existing capital structure prevents it from making the necessary adjustments to achieve long-term success,” stated Patriot Chief Executive Officer Irl F. Engelhardt.
The coal industry may need a few major factors to avoid its imminent demise. Cold winters and a Romney presidency. If President Barack Obama is elected to a second term, Big Coal will become a thing of the past if the last four years are any indication.
Remember that is was only this last march that Obama hit the industry with an uppercut when the EPA released Subpart TTTT of New Source Performance Standards this March. TTTT proposes rules that limits carbon dioxide emissions from new power plants. No coal-fired power plant can meet the emission limit (1,000 pounds of carbon dioxide per megawatt of power produced), but natural gas-fired power plants can. This will lead to some significant changes in the power energy once the rule goes final, sometime next year.
Today’s announcement by Patriot looks to be just the first domino to fall.