FollowingthereleaseofConturasthirdquarterfinancialreportonNovember29thandaconferencecall

withmanagementonDecember5th,wehavesummarizedtherelevantinformationasanupdatetoour
initialrecommendationonContura.
Q3Review
ConturareleaseditsfirstsetoffinancialinformationonNovember29.Thefinancialscoveredtheperiod
ofJuly26toSeptember30,thedatethatthecompanybeganoperations.Forthestubperiod,Contura
generated EBITDA of $25.6 million and free cash flow $20.9 million. The company also disclosed
productionandmarginsforeachoftheiroperatingdivisions.Theseresultsweregenerallyinlinewith
our estimates based on extrapolating the two month stub versus preliminary guidance and other
operationalinformationprovidedduringbankruptcy.Thefinancialstatementsalsoconfirmedatotalof
10.3millionsharesoutstandingandnetdebtof$246million(exclusiveofrestrictedcash).
2017Guidance
OfgreatersignificanceforvaluingConturaonagoforwardbasis,thecompanyintroducedformal2017
guidanceinitspressreleaseandupdatedinvestorpresentation.Alinktotheinvestorpresentationcan
befoundherehttp://conturaenergy.com/wpcontent/uploads/2016/11/ConturaIRPresentationFINAL
11.30.16.pdf.Wehavereproducedtheguidanceinthetablebelow:
Contura2017Guidance
Production
inmillionoftons
CAPP
NAPP

Low

High

3.5
7.6

4.3
8.2

PRB
Trading&Logistics

29.0
3.0

34.0
4.0

TotalShipments

32.0

38.0

Committed/Priced
CAPP
NAPP
PRB

Committed
30%
100%
94%

Avg.Price
$101.13
$42.31
$11.05

Costsperton
CAPP
NAPP
PRB

Low
$63.00
$28.00
$9.50

High
$68.00
$32.00
$10.50

Marginperton
TradingandLogistics

Low
$9.00

High
$15.00

Other(inmillionsexcepttaxes)
SG&A
IdleOperationsExpense
CashInterestExpense
DD&A
CapitalExpenditures
TaxRate

$32
$12
$32
$125
$90
20%

$39
$15
$35
$150
$110
30%

CoalMarketUpdate
Theseabornecokingcoalmarketcontinuestoshowresiliency,withspotbenchmarkforhardcokingcoal
FOB Australia currently at $300/tonne and High Vol A destined for Europe approximately $250/tonne
(FOB east coast). Negotiations are currently underway for the Q1 contract settlement, and we
understandthatthebid/askspreadtobe$250$300/tonneascomparedto$200/tonnethatwassettled
in Q4. In addition, over the last month, a number of commodity analysts have increased their 2017
average met coal prices, with many settling between $185 and $200/tonne, a level that is still well
below spot prices. We would note that the forward curve for 2017 is currently $192 and for 2018 is
$160.
2017Estimates
Basedonthemidpointoftheguidanceprovidedbythecompany,weestimate2017summaryfinancials
assuming$130/trealizedmetcoal(wellbelowtheforwardcurve)aswellasspotpricing:

2017Estimatesbasedonmidpointguidance
MetCoalPrice
$130/t
Revenue
EBITDA
FreeCashFlow

$1,193
$349
$172

Spot(1)
$1,362
$517
$298

(1)

$250AtlanticBasinFOBUSEastCoast,netoftransport

Valuation&UpcomingCatalysts
ForthepurposesofcalibratingourConturavaluation,webelievethatacomparisontoArchCoaltobe
themostmeaningfulgiveni)similarproductionmixofmetandthermalcoalandii)thefactthatboth
companiesrecentlyemergedfrombankruptcyprotection.Basedonthetablebelow,weestimatethat
ConturaistradingatamaterialdiscounttoARCHonanEV/EBITDAandFCFYieldbasis.Applyingsimilar
valuation parameters as ARCH would imply a share price of approximately $120 per CNTE share
(assuming a realized met coal price of $130 per ton). Using a broader comp set highlights an even
greaterdiscount.
We believe that there are a number of pending catalysts that will serve to close the valuation gap
between CNTE and ARCH as well as other peers. Specifically: 1) Pending listing on a recognized
exchange, given demand registration rights become effective February 1; 2) Management focus on
investor relations, as evidenced by recent conference call and detailed investor presentation; 3)

mainstreamresearchcoverage;4)filingofauditedfinancialstatementsbytheendofFebruary;and5)
coalsettlementpricesforQ1.

ValuationComparison
(millionsunlessnoted)

CNTE
$130/t

ARCH
Spot

(1)

FDShareso/s (2)
Shareprice
MarketCap
NetDebt(3)
Enterprisevalue

10.50
$69.00
$725
$ 247
$972

10.50
$69.00
$725
$ 247
$972

24.89
$82.00
$2,041
$55
$2,096

Revenue(4)

$ 1,193 $ 1,362

$2,556

(4)

EBITDA
EBITDAmargin

$ 349 $ 517
29%
38%

$468
18%

Freecashflow(4)
FCFmargin

$ 172 $ 298
14%
22%

$312
12%

EV/EBITDA
FCFYieldtoEquity

2.8 1.9
24%
41%

4.5
15%

1)

$250AtlanticBasin,FOBUSEastCoast,netoftransportcosts

2)

Fulldilutedutilizingtreasurymethodforcalculatingimpactofdilutiveinstruments
Includesunrestrictedcashonly

3)
4)

ForCNTE,assumesmidpointofguidance.ForARCH,assumesconsensusof4reportinganalysts

PeerAnalysis
ArchCoal
CloudPeakEnergy
ConsolEnergy
AllianceResourcePartners
CNXCoalResources
ForesightEnergy
NaturalResourcePartners

ConturaEnergy2017Guidance@$130/t
2017Guidance@Spot

ARCHUSEquity
CLDUSEquity
CNXUSEquity
ARLPUSEquity
CNXCUSEquity
FELPUSEquity
NRPUSEquity

CNTEUSEquity
CNTEUSEquity

Basedonconsensusestimates

2017EEBITDA(mm)
$468
$130
$886
$556
$130
$293
$214

EV/EBITDA
4.5x
6.2x
9.2x
4.7x
3.8x
6.0x
7.1x

Debt/EBITDA
0.1x
3.1x
3.6x
1.4x
2.0x
4.6x
5.2x

Average

5.9x

2.8x

$349.00
$517.00

2.8x
1.9x

0.7x
0.5x