Oxford Resource Partners Sells Illinois Assets - Analyst Blog

Thermal coal producer Oxford Resource Partners, LP OXF completed the sale of assets from its Illinois basin operation for $2 million. This asset sale does not come as a surprise as the partnership had idled operations at this basin during the fourth quarter of 2013 and was planning to monetize some of these assets to boost liquidity.

The transaction, which closed on April 11, 2014, involved Oxford Resource Partners' Island River terminal and related equipment located on the Green River in western Kentucky. Since the Illinois asset sale was well anticipated it failed to invoke any market reaction. During the fourth quarter earnings call, management mentioned that it expected to raise nearly $3 million from the sale of assets, subject to prevailing market conditions.

The strategy of Oxford Resource Partners is quite simple. The partnership wishes to overcome the persistently difficult coal market conditions by concentrating on its core Northern Appalachian operations. Consequently, it is gradually selling off its non-performing assets. The partnership has also idled two mines in the North Appalachian basin.

Oxford Resource Partners' mining complexes in the North Appalachian coal basin form its core operations. It has a strong committed sales position for the output from this region.  The partnership has been able to get 94% of 2014 projected sales volume committed and priced, throwing sufficient light on its revenue generation stream.

Coal usage in the first quarter must have increased on the back of a harsh winter and rising natural gas prices in the U.S. A sudden spurt in coal demand might encourage Oxford Resource Partners to return some of its idled mines to operation.

The partnership added coal reserves of 6.2 million tons in North Appalachia, replacing its production volumes in 2013. Alliance Resource Partners LP ARLP, a large coal operator, has an estimated reserve in excess of 177 million tons in the North Appalachian region

Oxford Resource Partners currently carries a Zacks Rank #1 (Strong Buy). Other stocks in the industry worth considering are Rhino Resource Partners LP RNO and Westmoreland Coal Co. WLB. Rhino Resource shares the same Zacks Rank as Oxford Resource Partners, while Westmoreland Coal carries a Zacks Rank #2 (Buy).