Massey Energy, Like BP, Posts Large Loss
Second quarter 2010 results from the coal company showed its revenue on coal sales rose from a year earlier, but $128.9 million of pretax charges associated with the Upper Big Branch Mine incident produced an $88.7 million quarterly loss.
The two companies most closely associated with the big safety disasters earlier this year have both posted second quarter 2010 losses as a result. Massey Energy Company (Richmond, Va.) reported an $88.7 million net loss July 27 even though its revenue on coal sales rose during the quarter to $693.1 million from $603.2 million a year earlier. The company announced that $128.9 million of pretax charges associated with the Upper Big Branch Mine (UBB) explosion produced the quarterly loss.
BP's loss associated with the Deepwater Horizon rig disaster and Gulf of Mexico oil spill was much larger. The company on July 27 announced a $17 billion quarterly loss, said it will sell assets for up to $30 billion during the next 18 months, and replaced its chief executive.
The companies have responded quite differently to their incidents. Massey has been pugnacious, suing MSHA as the on-site investigation of the April 2010 UBB explosion commenced and accusing it of tying Massey's hands when the company sought approval for increased ventilation plans prior to the explosion. BP, on the other hand, has accepted financial liability for the gulf incident and will set up a $20 billion compensation fund to pay damage claims.
For the first half of 2010, Massey's coal revenue was $1.26 billion and its net loss was $55.1 million, 59 cents per share. The comparable numbers in 2009 were coal revenue of $1.28 billion and net income of $63.6 million. The company's report indicated the $128.9 million in pretax charges includes estimates for loss of equipment, investigation costs, workers' compensation and other compensation and benefits provided to the families of the UBB miners, and charges expected to be incurred for litigation, net of insurance proceeds and other related costs.
"This was clearly a difficult quarter for everyone associated with Massey," Chairman/CEO Don Blankenship said. "The tragedy at Upper Big Branch and the ensuing, contentious investigation overshadowed our day-to-day operations and largely occupied the time and attention of management and many of our members. We continue to grieve the injury and loss of our miners. Our efforts to provide for the needs of the families of the injured or lost miners continue, as well. We remain intensely focused on the safety of all our mines and members even as the investigation to determine the cause of the explosion at UBB continues. We are also continuing our efforts to mitigate the lost production from UBB in order to serve our customers as best we can. These efforts have been disruptive to operations as we move crews and equipment to different locations, but they should allow us to improve and stabilize production in the coming quarters."