Deutsche Bank (DB) downgraded its rating on shares of Patriot Coal Corp. (NYSE:PCX) to "Hold" from "Buy", citing the volatility of the stock due to timing and uncertainty of financing arrangements and outcome of a recent customer default.
The bank also suspended its price target on the shares of the coal miner.
DB noted that the company's operations in the Central Appalachia face issues like structural declines and regulatory challenges. "Should market demand and its cash flow improve, PCX could invest in organic projects," the bank wrote in a note.
The bank wrote key upside/downside risks to its outlook include a pullback in global economic growth, slowdown in energy consumption, further coal inventory increase at utility companies, direction of energy prices, uncertainty with financing arrangements, changes in energy and/or carbon policy changes and consequent ramifications in switching fuels.
These dynamics tend to set the stage for global coal supply and demand fundamentals, and ultimately on the dynamics unfolding in the US, DB said.
Patriot Coal growth is contingent on the successful execution of its Black Oak met coal mine, Peerless coal mine and Rocklick & Wells complexes which could come on stream with results ahead of expectations or face delays and not lead to the expected increases in new production, as well as possibly require higher investments and/or face higher operating costs than expected, the bank said.
Earlier this month, the St. Louis, Missouri-based company entered into an agreement for a $625 million revolving credit facility and term loan from Citigroup Global Markets Inc. (C), Barclays Bank PLC and Natixis, New York Branch.
On Tuesday, the company said it is continuing to work with its lenders to strengthen its finances, including the replacement of its current credit facilities well before certain of its debt obligations become due in March 2013.
The stock, which has been trading between $1.36 and $24.99 over the past year, rose 10.0 percent to trade at $2.40 on Wednesday. Providing quality reviews, articles and writings on crude oil, energy and gas online.
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